Annual Report Consolidated and Statutory Financial …...Annual Report Consolidated and Statutory...

at December 31, 2006

101st fiscal year

Annual ReportConsolidated and Statutory Financial Statements

Annual Report Consolidated and Statutory Financial Statementsat December 31, 2006

sacascas

Stockholders MeetingStockholders are invited to attend the Ordinary andExtraordinary Stockholders Meeting to be held at theFiat Historical Center, Via Chiabrera 20, Turin, at 11 a.m.on April 3 2007 on the first call, on April 4 on the secondcall for the extraordinary session and on April 5 on thesecond call for the ordinary session and on the third callfor the extraordinary session to resolve on the following:

Agenda1. Statutory Financial Statements at December 31, 2006and Report on Operations; motion for the allocationof the net income for the year.

2. Motion for the purchase of own shares and modalitiesof their disposition; related resolutions.

3. Incentive plan pursuant to Article 114 bisof Legislative Decree 58/98; related resolutions.

4. Motion to amend Articles 9 (Convening ofStockholders Meetings and Adoption of ValidResolutions), 11 (Board of Directors), 12 (CorporateOffices, Committees and Directors’ Compensation), 13(Meetings and Duties of the Board of Directors) and 17(Appointment and Qualifications of Statutory Auditors)of the By-laws; related resolutions.

But it does move. Galileo Galilei

85 Fiat Group – Consolidated Financial Statements at December 31, 2006

86 Consolidated Income Statement87 Consolidated Balance Sheet89 Consolidated Statement of Cash Flows90 Statement of Changes in Stockholders’ Equity91 Consolidated Income Statement pursuant to Consob

Resolution No. 15519 of July 27, 200692 Consolidated Balance Sheet pursuant to Consob

Resolution No. 15519 of July 27, 200693 Notes to the Consolidated Financial Statements

199 Appendix – The Companies of the Fiat Group

233 Fiat S.p.A. – Financial Statements at December 31, 2006234 Financial Review of Fiat S.p.A. 238 Income Statement239 Balance Sheet240 Statement of Cash Flows241 Statement of Changes in Stockholders’ Equity242 Income Statement pursuant to Consob Resolution

No. 15519 of July 27, 2006243 Balance Sheet pursuant to Consob Resolution

No. 15519 of July 27, 2006244 Notes to the Financial Statements301 Appendix – Transition of the Parent Company Fiat S.p.A.

to International Financial Reporting Standards (IFRS)

319 Auditors’ Reports

323 Reports of the Board of Statutory Auditors

329 Items on the Agenda and Related Reports and Motions

Fiat S.p.A.Registered Office in Turin, Via Nizza 250Paid-in capital: 6,377,262,975 eurosEntered in the Turin Company RegisterFiscal Code: 00469580013

This Report has been translated into English from the original version in Italian. In case of doubt the Italian version shall prevail.

Board of Directors and Control Bodies

6 Letter from the Chairman and the Chief Executive Officer

9 Report on Operations10 The Fiat Group11 Highlights – Group13 Highlights by Sector14 Stockholders16 Sustainability Report17 Research and Innovation21 Human Resources24 Financial Review of the Group49 Corporate Governance53 Stock Option Plans55 Transactions among Group Companies

and with Related Parties56 Significant Events Occurring since the End

of the Fiscal Year and Business Outlook

59 Operating Performance by Sector of Activity62 Fiat Auto – Fiat, Alfa Romeo, Lancia

and Fiat Light Commercial Vehicles66 Maserati67 Ferrari68 Agricultural and Construction Equipment70 Trucks and Commercial Vehicles74 Fiat Powertrain Technologies76 Components78 Metallurgical Products79 Production Systems80 Services81 Publishing and Communications83 Motion for Approval of the Financial Statements

and Allocation of the 2006 Net Income

Board of Directors and Control Bodies

5

Board of Statutory Auditors

Statutory AuditorsCarlo Pasteris – Chairman Giuseppe Camosci Cesare Ferrero

Alternate AuditorsGiorgio Giorgi Piero Locatelli Roberto Lonzar

External Auditors

Deloitte & Touche S.p.A.

Board of Directors

ChairmanLuca Cordero di Montezemolo (3)

Vice ChairmanJohn Elkann (1) (3)

Chief Executive OfficerSergio Marchionne (3)

DirectorsAndrea AgnelliRoland Berger (3)

Tiberto Brandolini d’Adda Luca Garavoglia (1)

Gian Maria Gros-Pietro (1)

Hermann-Josef Lamberti (2)

Virgilio MarroneVittorio Mincato (2)

Pasquale Pistorio (3)

Carlo Sant’Albano Ratan TataMario Zibetti (2)

Secretary to the BoardFranzo Grande Stevens

(1) Member of the Nominating and Compensation Committee(2) Member of the Internal Control Committee(3) Member of the Strategic Committee

Contents

4

Letter from the Chairman and the Chief Executive Officer 7Letter from the Chairman and the Chief Executive Officer6

2006 has been an important year for the Fiat Group. It markedthe end of the turnaround phase and the beginning of a new,exciting phase of growth. The plan implemented over the pastthree years has made a clean break with the past. Fiat’smanagement structure has been reshaped and strengthened,with the creation of lean, efficient and agile organizations inall of our businesses. Special attention has been given tostrengthening our brands’ market positioning and proximityto the client. All of this was combined with significant effortsdirected at rationalizing processes and achieving higher levelsof efficiency in all Group business areas.

We have laid the basis for building the Group’s future inindustrial, financial and commercial terms.

The first significant breakthrough was made in 2005, withthe Group posting a net profit for the first time since 2001.The improvements continued throughout 2006, with the AutoSector reporting its first full-year trading profit since 2000.The other Sectors, especially Iveco and CNH, also generateda good level of top line growth and significant marginexpansion.The Group’s results in 2006 will allow us to distribute adividend to our stockholders for the first time in five years. Restructuring efforts were accompanied by major new andupgrading product program in every area of activity. In theAuto Sector alone, this has meant rolling out 22 new modelsand restylings in just two years, which has enabled us to gainsignificant market share both in Italy and in major Europeancountries.Our future also sees Fiat as a much more international group,and significant steps in this direction were taken as evidencedby the number of international agreements reached during theyear.

The Automobiles Sector focused on reinforcing its presencein two high-growth markets, Russia and India, by entering intocommercial and industrial agreements with Severstal Auto and

Tata Motors. Iveco significantly accelerated its growthstrategy in China by reaching agreements with SAIC,Chongqing Heavy Vehicle Group, and Nanjing Motor Company.At the financial level, the Group steadily reduced its netindustrial debt, which fell below 1.8 billion euros at theend of 2006 due to a strong industrial cash flow generation. The Group’s cash position remains high, at almost 8 billioneuros at December 31, 2006.All of these factors have contributed to restoring confidencein Fiat. This is confirmed by the improvement in its debt ratings, itsability to attract a large number of institutional internationalinvestors when it issues debt securities, and its steadily risingstock market price.

The results we present on these pages are the fruit of an intenseand rigorous commitment. But more than anything else, theyreflect the new mentality prevailing at Fiat today, at all levelsand in every area of activity.Delivering on our promises is a key value for us. Wedemonstrated this by achieving and, in many cases, exceedingall the targets proposed to the markets three years ago.Promoting on the basis of merit, making individualsaccountable, and giving them a wide margin of operatingfreedom are some of the key drivers that are beginning to bringabout a significant, structural cultural change in the company.Embracing and cherishing competition and looking at the futureas an opportunity to be seized and exploited has become ourphilosophy.These changes were made possible as a result of aredefinition of the concept of leadership and its significancein the management of our businesses, which has enabled Fiat toreinforce its market positions, greatly accelerate productdevelopment timeframes and make a leap in quality. The men and women who now work in our Group – and whohave done a hard job these years to restore the pride andcredibility of Fiat – are the best guarantee for the futureof our company.

Letter from the Chairmanand the Chief Executive Officer

We want to express our most sincere thanks to all of themfor the results achieved.

The plan marked out for the next four years is even moreambitious and challenging. It is a plan geared towards growth.Improved operating performance across all businesses,accompanied by significant investments, and growingprofitability in every business area will consolidate Fiat’sposition as a major international industrial group.Here again, the targets set for each of the years up to 2010are clear and rigorous.In 2007, these targets envisage that the Group turn a tradingprofit of between 2.5 and 2.7 billion euros and realize netincome of between 1.6 and 1.8 billion euros.The trading margin target for the Automobiles Business Area,which faces the challenge of a fairly stable market in Europeand a slowly expanding one in Brazil, has been set at 2.6-3.4%.This is almost double the figure for 2006. That result will besupported by the start of sales of new models, especially FiatBravo, Fiat Linea, and Fiat 500, and actions to streamlinegovernance costs.

For the other principal activities, the aim is to realizesignificant trading margins: 9+% for CNH and 7+% for Iveco.

We are committed to building a great Company. This is why we will keep the pressure up and continue todemand maximum effort from all the men and women at Fiat.We will continue to cut costs in non-essential areas.We will flank our continuously developing technologies with animproved commercial organization and more efficient services.We will continue investing in product and process innovation,devoting special attention to quality standards. We will be ready to seize any positive opportunities thatshould arise to stimulate our growth even more, throughtargeted cooperation with significant partners. The Fiat of today has the will, capacity, and solid foundationfor setting out on a significant path of development, whileholding on firmly to those values of honesty, integrity, andaccountability that have sustained us thus far. This is our commitment and, at the same time, our newpromise.

Turin, February 20, 2007

Luca Cordero di MontezemoloChairman

Sergio MarchionneChief Executive Officer

10 The Fiat Group

11 Highlights – Group

13 Highlights by Sector

14 Stockholders

16 Sustainability Report

17 Research and Innovation

21 Human Resources

24 Financial Review of the Group

49 Corporate Governance

53 Stock Options Plans

55 Transactions among Group Companies and with Related Parties

56 Significant Events Occurring since the Endof the Fiscal Year and Business Outlook

59 Operating Performance by Sector of Activity

83 Motion for Approval of the Financial Statementsand Allocation of the 2006 Net Income

Report on Operations

The wheel that keeps turning won't rust. Ancient Greek proverb

(in millions of euros) 2006 2005

Net revenues 51,832 46,544Trading profit 1,951 1,000Operating result 2,061 2,215Income before taxes 1,641 2,264Net result for the year 1,151 1,420Attributable to:- Equity holders of the parent 1,065 1,331- Minority interests 86 89Basic earnings per ordinary and preference share (in euros) (1) 0.789 1.250Basic earnings per savings share (in euros) (1) 1.564 1.250Normalised basic earnings per ordinary and preference share (in euros) (2) 0.828 1.250Normalised basic earnings per savings share (in euros) (2) 0.983 1.250Diluted earnings per ordinary and preference share (in euros) (1) 0.788 1.250Diluted earnings per savings share (in euros) (1) 1.563 1.250Investments in tangible and intangible assets 3,789 3,052- of which: Capitalised R&D costs 813 656R&D expenses (3) 1,598 1,558Total Assets 58,303 62,454Net debt 11,836 18,523- of which: Net industrial debt 1,773 3,219Stockholders’ equity before minority interest 10,036 9,413Group interest in stockholders’ equity 9,362 8,681Employees at year-end (number) 172,012 173,695

(1) For additional information on the calculation of basic and diluted earnings per share see Note 12 of the Notes to the Consolidated Financial Statements. (2) Normalised earnings per share have been calculated excluding the effects arising from the assignment of prior period dividends to savings shares.(3) This amount includes capitalised R&D costs and costs charged directly to operations during the fiscal year.

Selected data by regionNumber of Number of Number of Number of R&D RevenuesCompanies Employees Facilities Centres (in millions of euros)

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Italy 146 155 75,751 77,070 52 56 50 52 14,851 13,078Europe excluding Italy 285 280 42,904 43,376 56 58 32 32 20,298 18,518North America 76 80 11,714 12,572 25 28 15 17 6,315 6,048Mercosur 31 40 30,877 29,132 20 20 10 10 5,416 4,364Other regions 99 99 10,766 11,545 27 27 9 9 4,952 4,536Total 637 654 172,012 173,695 180 189 116 120 51,832 46,544

Report on Operations Highlights – Group 11

Highlights – Group

Report on Operations The Fiat Group10

The Fiat Group performs automotive manufacturing andfinancial service activities in more than 190 countries.Below is a description of how the Group is currentlystructured, as a result of its refocusing on the automotivebusiness. Reporting of Group activities was redefinedby Business Areas as follows:

AutomobilesFiat Auto produces and sells automobiles (Fiat, Alfa Romeoand Lancia brands) and light commercial vehicles (Fiat LightCommercial Vehicles brand). The Sector’s main financingactivities in Europe were grouped into Fiat Auto FinancialServices, a 50-50 joint venture established at the end of 2006with Crédit Agricole.The Sector is represented by Fiat Auto S.p.A. and itssubsidiaries. On February 1, 2007, Fiat Auto S.p.A. changed name to“Fiat Group Automobiles S.p.A.”, and four new companieswere formed at the same time, 100% owned by Fiat GroupAutomobiles S.p.A.: “Fiat Automobiles S.p.A.”, “Alfa RomeoAutomobiles S.p.A.”, “Lancia Automobiles S.p.A.” and“Fiat Light Commercial Vehicles S.p.A.”. The operations andthe personnel will remain at Fiat Group Automobiles S.p.A.

The Fiat Group also controls Maserati and Ferrari. They produceluxury sports cars that excel for their exclusive characteristics,technology and performance.

Agricultural and Construction EquipmentCNH – Case New Holland operates in the field of tractorsand agricultural equipment through the Case IH and NewHolland brands and in the construction equipment businessthrough the Case and New Holland brands. Its financialservices provide support to its end customers and dealers.

Trucks and Commercial VehiclesIveco designs, produces and sells a complete line of commercialvehicles under the Iveco brand, buses under the Irisbus brand,and fire-fighting and special purpose vehicles under the Iveco,Astra and Magirus brands. In addition, Iveco provides a widerange of financing services to its customer and dealers mainlythrough Iveco Finance Holdings Ltd, a company 51% owned by the Barclays Group and 49% by Iveco.

The Fiat GroupComponents and Production SystemsFiat Powertrain Technologies (FPT) is the Sector whichgroups all passenger car engine and transmission activities.Fiat regained control over these activities in May 2005following termination of the Master Agreement withGeneral Motors. Starting in 2006, the Sector also includesthe powertrain operations of Iveco and of the Centro RicercheFiat (Fiat Research Centre). Within the framework of itstechnological development projects, FPT coordinates Elasis’powertrain activities.Magneti Marelli produces components for lighting systems,exhaust systems, suspensions and shock absorbers, enginecontrol units, and electronic systems.Teksid supplies engine blocks, cylinder heads and othercast-iron components for engines; cast-iron components fortransmissions, gearboxes and suspensions; and magnesiumbodywork components.Comau produces industrial automation systems for theautomotive industry in the areas of product and processengineering, logistics and management, manufacturing,installation, production start-up and maintenance.

Other BusinessesThis area includes the Services Sector (Business Solutions)and the Publishing and Communications Sector, engagedin the following businesses:

n Services in the areas of personnel administration andadministrative and corporate finance consulting, mainlyprovided to Group companies. As of January 1, 2007, BusinessSolutions’ activities were transferred to Fiat Services S.p.A.,a company that will provide services exclusively to the FiatGroup (starting from 2007 Fiat Services will be includedamong Holding companies & Other companies). The BusinessSolutions Sector will therefore no longer be represented.

n The La Stampa daily newspaper and Publikompass, a companythat sells advertising space for multimedia customers.

Other Businesses also include Holding companies and Othercompanies.

Net revenues Trading profit Operating result Total operating assets

(in millions of euros) 2006 2005 2006 2005 2006 2005 2006 2005

Fiat Auto 23,702 19,533 291 (281) 727 (818) 12,948 16,231Maserati 519 533 (33) (85) (33) (85) 300 235Ferrari 1,447 1,289 183 157 183 157 918 936Agricultural and Construction Equipment (CNH) 10,527 10,212 737 698 592 611 17,756 17,860Trucks and Commercial Vehicles (Iveco) (1) 9,136 8,483 546 332 565 212 6,131 6,033Fiat Powertrain Technologies (1) 6,145 4,520 168 109 102 81 4,103 4,220Components (Magneti Marelli) 4,455 4,033 190 162 175 127 2,294 2,363Metallurgical Products (Teksid) 979 1,036 56 45 26 27 616 671Production Systems (Comau) 1,280 1,573 (66) 42 (272) (8) 933 1,091Services (Business Solutions) 668 752 37 35 28 7 228 341Publishing and Communications (Itedi) 401 397 11 16 12 13 243 186Holding companies, Other companies and Eliminations (7,427) (5,817) (169) (230) (44) 1,891 (582) 534Total for the Group 51,832 46,544 1,951 1,000 2,061 2,215 45,888 50,701

Total operating liabilities Investments (*) R&D expenses (**) Number of employees


Fiat Auto 12,446 15,638 2,163 1,582 675 665 44,691 46,099Maserati 367 270 82 20 46 57 649 606Ferrari 634 625 142 142 83 86 2,870 2,809Agricultural and Construction Equipment (CNH) 14,653 14,483 394 255 289 234 25,335 25,420Trucks and Commercial Vehicles (Iveco) (1) 5,784 5,591 342 321 174 211 24,533 24,323Fiat Powertrain Technologies (1) 2,444 2,258 254 296 74 68 18,924 18,161Components (Magneti Marelli) 1,625 1,620 293 313 217 197 25,195 24,213Metallurgical Products (Teksid) 365 419 32 45 5 5 8,342 8,952Production Systems (Comau) 712 828 56 38 20 20 12,293 12,725Services (Business Solutions) 360 437 10 19 – – 5,057 5,436Publishing and Communications (Itedi) 188 161 45 20 – – 836 846Holding companies, Other companies and Eliminations (1,227) 338 (24) 1 15 15 3,287 4,105Total for the Group 38,351 42,668 3,789 3,052 1,598 1,558 172,012 173,695

(1) Since January 1, 2006 Fiat Powertrain Technologies (FPT) perimeter comprises the passenger vehicles engine and transmission activities – over which Fiat regained control and started toconsolidate in May 2005 following termination of the Master Agreement with General Motors – as well as the industrial powertrain activities that were included in the Iveco perimeter untilDecember 31, 2005. The relevant 2005 figures have been reclassified accordingly.

(*) Investments in tangible and intangible assets (net of vehicles sold with buy-back commitments).(**) Including capitalised R&D costs and costs charged directly to operations during the fiscal year.

n Fiat Group recorded revenues of 51.8 billion euros in 2006,up 11.4% from 2005. The improvement was largely attributableto Fiat Auto, whose revenues rose by 21.3%, and Iveco, up 7.7%.CNH reported a 3.1% increase in revenues (+2.4% excludingthe foreign exchange translation impact). Revenues also roseat the Components & Production Systems Business Area:+11.0% (on a comparable basis) at Fiat PowertrainTechnologies and +10.5% at Magneti Marelli. Comaurevenues were down 18.6% reflecting a severe slowdownin industry-wide demand for its services.

n In 2006 trading profit amounted to 1,951 million euros(3.8% of revenues), nearly doubling the 1,000 million euroslevel recorded in 2005 (2.1% of revenues). Significantimprovements were achieved in the Automobiles BusinessArea, particularly at Fiat Auto, which reported a full yeartrading profit of 291 million euros, against a trading lossof 281 million euros in 2005, and by Iveco, whose trading profitrose from 332 million euros to 546 million euros. CNH posteda 5.6% increase in trading profit, from 698 million euros to737 million euros (excluding the difference in the one-timeimpact from a reduction in health-care costs, the year-over-year improvement would have been 97 million euros or 15.8%).The Components & Production Systems Business Areareported slightly lower trading profit (348 million euros versus358 million euros in 2005) reflecting a sharp drop at Comau,currently in a restructuring process, only partly offset byimprovements at Magneti Marelli, Fiat Powertrain Technologiesand Teksid. Excluding Comau, trading profit of the Components& Production Systems Business Area increased by 98 millioneuros, delivering a trading margin of 3.7%.

n Operating result for the year totalled 2,061 millioneuros, compared with 2,215 million euros in 2005. The 154-million-euro decrease reflects higher tradingprofit of 951 million euros and lower net unusualincome of 1,105 million euros (2006: 110 million euros,2005: 1,215 million euros).

n Income before taxes totalled 1,641 million euros in 2006,compared with 2,264 million euros in 2005. Net of changesin unusual items (including the 858 million euro unusualfinancial income on the conversion of the MandatoryConvertible Facility), income before taxes improvedby 1,340 million euros in 2006.

Report on Operations Highlights by Sector 13

Highlights by Sector

Report on Operations Highlights – Group12

n Net result for the year was 1,151 million euros, comparedwith 1,420 million euros in 2005. Excluding the impact ofnet unusual items, the Group would have posted a net lossof 376 million euros in 2005 and a net income of 1,041 millioneuros in 2006. Therefore, on a like-for-like basis, net incomeimproved by 1,417 million euros.

n Net industrial debt decreased during the year byapproximately 1.4 billion euros to 1.8 billion euros,reflecting positive business performance and notwithstandingthe re-acquisition of 29% of Ferrari for 919 million euros. Theratio of net industrial debt to equity at the end of 2006 was0.18 (0.34 at the end of 2005).

n The Group’s cash position at December 31, 2006 wasapproximately 8.0 billion euros, (7.0 billion euros at theend of 2005) largely impacted by the over 3 billion eurosderiving from the closing of the joint venture betweenFiat Auto and Crédit Agricole at the end of December 2006,partly offset by the utilisation of cash to reduce gross debtduring the year.

IFILInvestments S.p.A. 30.40%UnicreditoItaliano 5.71%FMR Corp. 5.05%GeneraliGroup 2.21%InstitutionalInvestors EU 21.97%Institutional Investorsoutside EU 7.76%Otherstockholders 26.90%

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0Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fiat Ordinary Fiat Preference Fiat Savings

Official price per share:(in euros) 12.29.06 12.30.05 12.30.04 12.30.03 12.30.02 12.28.01

Ordinary shares 14.468 7.333 5.897 6.142 7.704 17.921Preference shares 12.119 5.935 3.976 3.704 4.348 12.267Savings shares 13.880 6.558 4.243 3.957 4.183 11.459

Minimum and maximum monthly price in 2006 (in euros)

Fiat Ordinary Fiat Preference Fiat Savings

Report on Operations Stockholders 15

Major StockholdersA total of 1,092,247,485 ordinary shares are outstanding. As oftoday, the following individual and institutional investors haveholdings exceeding 2% of total outstanding ordinary stock.

Ordinary shares: 1,092,247,485IFIL Investments S.p.A. (*) 30.40%Unicredito Italiano 5.71%FMR Corp. 5.05%Generali Group 2.21%Institutional Investors European Union 21.97%Institutional Investors outside European Union 7.76%Other stockholders 26.90%

(*) Including 0.34% of treasury stock held by Fiat S.p.A.

Highlights per share(in euros) 2006 2005

Basic earnings per share (ordinary and preference) 0.789 1.250Basic earnings per savings share 1.564 1.250Diluted earnings per share (ordinary and preference) 0.788 1.250Diluted earnings per savings share 1.563 1.250

Report on Operations Stockholders14

Financial communicationFiat maintains a constant dialogue with its Stockholdersand Institutional Investors, pursuing a policy of opencommunication with them through its Investor Relationsfunction. Over the course of the year, the Investor Relationsfunction organises presentations, live or through conferencecalls, after the regular publication of Group results or otherevents requiring direct communications with the market.Moreover, the programme includes several seminars thatprovide a more in-depth understanding of the operatingperformance and strategies of the principal Group Sectors,as well as meetings and roadshows that permit a directrelationship between the financial community and the Group’stop management. The most important meeting of 2006 wasthe Fiat Investor and Analyst Meeting held on November 8and 9 in Turin at the Lingotto. At the meeting, Fiat’s ChiefExecutive Officer and the top management of all Sectorsillustrated the Group’s 2007-2010 plan to an audienceof analysts and investors.

More information is available at the Group’s institutionalwebsite www.fiatgroup.com. The Investor Relations sectionprovides historical financial data, institutional presentations,periodic publications, and real time updates on Fiat stock.

Fiat stockholders may also contact:

For holders of Fiat shares:Toll-free telephone number in Italy:800-804027E-mails:[email protected]@fiatgroup.com

Average monthly trading volume (in millions of shares)

Performance of Fiat stock with respect to MIBTEL and Eurostoxx Auto indexes since January 1, 2006(1/1/06=100)

Stockholders

Fiat Milan DJ Eurostoxx Automotive Mibtel

210

190

170

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130

90

110

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Stock markets worldwide posted strong gains in 2006. At the international market level, growth was posted in the Asian stock markets, with the Hong Kong stock exchange rising by 121%, and Wall Street recorded an increase of 16%. At the European level, the Madrid (+32%), Frankfurt (+22%), Paris (+18%) and London (+13%) stock exchanges recorded excellent performances.2006 was a record year for the Milan stock exchange which posted an increase for the fourth consecutive year: MIB index +19%, S&P/Mib +16%.In 2006, the European automotive market confirmed the positive growth trend recorded in 2005: the automotive sector index (Dow Jones Eurostoxx Auto) posted an increase of 26%. Againstthis background, Fiat stock almost doubled in value posting an increase of 97%. The market has therefore once again rewarded the successful achievement of the Group financial targets for 2006.

For holders of ADRs:Toll-free telephone numberin the USA and Canada:800 749 18 73Outside the USA and Canada:+1 201 680 66 26Website: www.adr.db.com

Major stockholders whose holding exceeds 2% (as of February 15, 2007)

Report on Operations Research and Innovation 17

Research and Innovation

Report on Operations Sustainability Report – Economic, environmental and social responsibility16

Now in its third year, the Group’s Sustainability Report atteststo the importance that Fiat assigns to full, open disclosure,not just of the information that demonstrates financialaccountability, but in terms of social and environmentalresponsibility as well.The 2006 Sustainability Report is the result of the Group’s firmcommitment to achieving the kind of reporting that bestreflects its organisation and the needs of its stakeholders:a commitment that grows stronger with every passing year.

Thus, the prize for the year’s best reporting initiative that FERPI,the Italian Public Relations Federation, conferred on the Group’sAnnual Report in 2005 did more than reward the efforts of all thepeople at Fiat who share this commitment: it spurred them to dobetter, and demonstrate that the praise that was well-earned thenis still richly deserved. This is one of the reasons that the 2006Sustainability Report, though continuing the work done inprevious years, introduces several major changes. They arechanges designed to meet several key needs: the need toincrease inclusiveness by reaching out to all of the Company’sstakeholders and speaking a language they can all respond to;the need to let analysts and opinion leaders know how well theCompany measures up in such important areas as corporatesocial responsibility and ethical finance; the need to followGlobal Reporting Initiative guidelines even more closely.

To enable stakeholders to gauge the Group’s contribution tosustainable growth, the Report illustrates the work done duringthe year from the standpoint of its economic, environmentaland social impact. After presenting the 2006’saccomplishments, the measures introduced to promotegreater stakeholder engagement, and an overview of theCompany’s organisation and corporate governance structure,the Report uses the three-dimensional Triple Bottom Lineapproach to measure its work against performanceindicators that go beyond classic financial reporting criteria.As such, it is divided into three sections, where informationis grouped according to the stakeholders concerned in orderto ensure greater clarity.

As the section on economic responsibility illustrates, Fiatcontinued to focus on value creation and boosting theGroup’s financial ratings and competitiveness, putting thecustomer square at the centre of its growth strategies andpartnering with other major international groups.

In the section on environmental responsibility, the Groupprovides a comprehensive view of its attention to ensuringsustainable manufacturing practices at its production plantsand to developing products with the lowest impact onthe environment by reducing energy consumption, cuttingemissions and increasing efficiency. In addition, the sectionillustrates research work carried out and its applicationson environmentally-friendly mobility and traffic safety.

The section on social responsibility scrutinises the Group’srelationship with its worldwide workforce and the public. Thissection provides details and statistics about employees andhiring policies, as well as discussing the initiatives promotedin favour of young people, health and safety, equalopportunities, education and training and employee benefits.The section concludes with a description of the Group’scommunity outreach efforts, including programs for helpingpeople with physical disabilities retain their mobility.

The Report is posted in the Sustainability section of theGroup’s website at www.fiatgroup.com, where stakeholdersare invited to provide their feedback regarding the Company’scorporate social responsibility by filling in the questionnaireor sending e-mails at [email protected].

Sustainability Report Economic, environmental and social responsibility

Centre’s global innovation strategies, ensures that it canimplement specific operations at the local level, and helpsit create skills and monitor its competitiveness and growth.

Further information is available on the Centre’s website atwww.crf.it.The work of the Centro Ricerche Fiat focuses on several keyareas of technology.

Powertrain Research and Technology The major objective in this field is to develop and applyinnovative technologies for improving powerplant performance,cutting engine and vehicle emissions, and boosting fueleconomy. The Centro Ricerche Fiat’s most significantaccomplishments for 2006 in this area are reviewed below:

n Multijet II. As part of Fiat Powertrain Technologies R&Defforts, predevelopment work on the new Multijet II dieselinjection system was completed in 2006. This system is able tomanage the multiple injection process developed for the earlierMultijet without the latter’s limitations on the distance betweensuccessive injectors, thus bringing significant performancebenefits. The high-pressure pump was also redesigned,reducing significantly costs.

n Two-cylinder spark ignition engine. Alongside Multiairelectronic valve control technology, downsizing is anotherstepping stone in Fiat Powertrain Technologies’ strategic pathtowards achieving minimal CO2 emissions. Thus, work is nowconcentrating on developing small supercharged engines thatcan replace naturally aspirated powerplants with largerdisplacements. In 2006, the first version of a superchargedtwo-cylinder Multiair engine was developed, and prototypeswere put through their paces in an array of bench and on-vehicle tests that assessed their potential in termsof performance, fuel economy and noise emissions.

n Panda Hydrogen. For all of the intense effort that has goneinto development and testing, hydrogen powered vehiclesplying our streets and highways are still a long way in thefuture. But with an eye to that future, the Fiat Groupis concentrating on small, fuel cell city cars: the SeicentoElettra H2 Fuel Cell unveiled in 2001, the Seicento Hydrogen

To promote sustainable mobility on multiple fronts, the FiatGroup has organised its research and innovation work throughtwo companies, the Centro Ricerche Fiat (Fiat Research Centre)and Elasis, whose strategies are coordinated by the TechnicalCommittee of the Group Executive Council.In 2006, the Group’s research and development expenses1

amounted to approximately 1.6 billion euros or around 3.2%of net industrial activities. Overall, R&D activities involve some13,200 people at 116 centres.

Centro Ricerche Fiat (Fiat Research Centre)The Centro Ricerche Fiat provides the Group with effective,innovative solutions at competitive prices, ensuring smoothtechnology transfer by further increasing the professionalqualification of personnel through training. This enablesthe Centre to play an active role in supporting technologicalgrowth for the Fiat Group, its partners and the communitieswhere they work in such fields as motor vehicles andcomponentry, energy, safe and environmentally-friendlymobility, telematics, innovative materials and relevanttechnologies, mechatronics and optics.In particular, the Centre’s work in innovative powerplants,alternative propulsion systems and transmissionsis conducted through Powertrain Research and Technologyheaded by Fiat Powertrain Technologies, the Fiat Group Sectorset up in May 2005 which groups together all of the Group’sactivities in this area.In addition to its headquarters in Orbassano on the outskirtsof Turin, the Centro Ricerche Fiat has four branches in Bari,Catania, Trento and Foggia, as well as a controlling interestin the C.R.P. Plastics and Optics Research Centre in Udine,whose work focuses on advanced research in the field of opticsand plastics for automotive lighting systems. With a staffof 870 employees, the Centro Ricerche Fiat made significantprogress during the year, as witnessed by the 61 new patentapplications it filed in 2006, bringing the total number ofpatents held by the Centre to over 2,100. A further 900 patentsare currently pending. In addition, the Centro Ricerche Fiatwas awarded 128 projects in the EU’s Sixth FrameworkProgram, confirming its leadership in European research. TheCentro Ricerche Fiat cooperates with over 150 universitiesand research centres, and more than 750 industrial partnersaround the world. This network further strengthens the

(1) Includes capitalised research and development expenses and those charged directly against income for the year.

in 2003, and now the Panda Hydrogen fuel cell, developedjointly with Fiat Auto. The new car’s performance iscomparable to that of the conventional fuel-burning standardproduction Panda: with a 60 kW propulsion system, the fuelcell car reaches a top speed of 140 kph, accelerates from 0 to50 kph in five seconds, and can climb 23% grades. Cruisingrange is 220 kilometres, and refuelling takes less than fiveminutes.

Advanced Technology for Mobility and Safety In this area, the main objective is to make available to theFiat Group technological and systems-related skills inelectronics, telematics, ICT and preventive safety needed tomake vehicles safer and more versatile. Major achievementsin 2006 included:

n Convergence. Marketed under the tradename Blue&Me,Convergence, the voice activated in-car infotainment systemspringing from an agreement between Fiat Auto and Microsoft,is another step forward in the Fiat Group’s approach totelematics. In 2006, the Centro Ricerche Fiat took over fromMicrosoft as System Integrator for all new developments basedon this platform for Fiat Auto, and will perform the same roletogether with Magneti Marelli for the Group’s other Sectors.The first device integrating on-board navigation launched withthe Bravo is an example of the Centro Ricerche Fiat’s work inthis area. The device can be upgraded after purchasing the carwithout having to go back to the dealer.

n Multi-Function Optical Sensor (MFOS). Developed incooperation with Magneti Marelli, the MFOS features a singleviewing matrix that integrates several automotive functionsinvolved in scene recognition (identifying oncoming vehicles,tunnels and bridges, approaching curves and lanes) and inmonitoring the vehicle’s environment (lighting, fog, rain andwindow misting). Its main advantages include a high levelof integration between the functions, management via a singleelectronic processing unit, a low number of sensors andcomponents, and simplified on-vehicle wiring, which resultin a general reduction of costs.

In addition, Elasis cooperated with the Naples Employers’Association and chambers of commerce in Southern Italyto help the area’s small and medium enterprises make themost of their skills.Further information is available on the Centre’s websiteat www.elasis.it.

During the year, significant achievements were made inthe following areas:

n Innovative methods for products and processes. In the areaof virtual simulation, Elasis developed DMU digital mock-upmethods that provide a faithful, realistic representationof the vehicle, as well as digital factory methods that simulatethe entire manufacturing process. In the course of 2006,the Centre also performed virtual analyses of new productmaintainability, and produced simulations of vehicle interiorsand exteriors.The Elasis Biomechanics and Occupant Protection Centredeveloped methods for investigating biomechanicalparameters in the crash tests called for by internationalregulations and rating systems. The Centre also workedon applying these methods to all Fiat Auto models now underdevelopment and provided assistance to the other Fiat Groupsectors.

n Vehicle research. In order to constantly improve productquality, Elasis developed a method capable of providingobjective measurements of the vehicle’s main performancequality parameters. The method uses a data logger thatmonitors the vehicle and can determine whether it meetsperformance targets in only four hours, thus makingit possible to detect any slow drift and compile a databaseof all measurements. During 2006, the Fiat Group also finishedreinsourcing the quality control programs used to analysedealer returns. In addition, Elasis provided Fiat Auto withsupport in developing a number of new products, includingthe Minicargo, the Alfa Romeo 8C Competizione and the FiatCroma. For Ferrari, Elasis developed new architectures whichcan be used in the brand’s new 12-cylinder offerings.

Report on Operations Research and Innovation 19

n Safety Truck. Several Iveco Stralis vehicles were equippedwith sensor systems to assist the driver in interpreting the roadscenario, detecting obstacles and avoiding lane departures.In particular, integrated Preventive Safety, Active Lane Assistant,Front Collision Warning, Blind Spot Monitoring, ExternalCameras (Classes V and VI), Start Inhibit (Pedestrian Detection),and Night Vision (Far/Near Infrared) systems generate warningsignals using an active EPS electrically powered steeringactuator and electric seat belt pretensioners.

Passive safety was improved by introducing a fixed-hubsteering wheel which makes it possible to employ an airbagthat provides more effective protection in a head-on collision,together with a GSC collapsible steering system. A numberof lateral rollover protection systems were also analysed usinga numerical simulation environment.

ElasisSet up in 1988 by the Fiat Group as a company dedicatedto research work in the framework of developmentprogrammes for Southern Italy, Elasis has grown into ahighly specialised research centre whose work addressestechnological innovation, complete vehicle development,mobility and its environmental impact, and traffic safety.The Centre has two sites in Pomigliano and Lecce, bothlocated in Southern Italy, with 765 employees and is providedwith sophisticated computer-aided design and calculationtools and advanced physical and virtual testing equipmentwhich are based on an ability to develop and manageinformation systems that puts Elasis in the front ranks ofthe world’s R&D centres. At Elasis, work on engines andtransmissions is carried out as part of Fiat PowertrainTechnologies’ development projects.In 2006, Elasis continued to pursue its strategic objectivesof forging new links in the research/innovation system’s valuechain and of promoting local development. In pursuing thisobjective, Elasis worked within consortia including universitiesand private institutions in basic research and training,continuing to sharpen its focus on the issues relatedto mobility and its environmental impact.

Report on Operations Research and Innovation18

n Productivity on the road. Conducted together with Iveco,the Productivity On The Road initiative focuses on adaptingthe on-board platform derived from Fiat Auto’s Convergenceto light, medium and heavy truck architectures. As part of thiswork, versions of Microsoft’s Windows Mobile For Automotiveoperating system were developed and validated for the Dailyand Stralis vehicles. For the system’s Services and ControlCentre, the Centro Ricerche Fiat developed a commonarchitecture for the entire Fiat Group which provides application-specific features for each area. The first commercial package puton the market will include services for fleet management,mission management, messaging and driver management.

Vehicles and advanced manufacturingand materialsThe goals in this area are to develop innovative body andinterior architectures for vehicle systems that can increaseperformance and add to the features that ensure productrecognition while meeting all cost constraints and the needfor effective, technologically advanced solutions.Major accomplishments in 2006 were as follows:

n Panda Multieco. A joint development by the Centro RicercheFiat, Powertrain Research and Technology in cooperation withFiat Auto, the Panda Multieco concept was unveiled at theGeneva Motor Show. The concept integrates proven automotivetechnologies with the most forward-looking applications ofenvironmentally friendly processes and materials for both theinterior and the body. This combination cuts carbon dioxideemissions by 42% in the urban cycle and by 32% in the NewEuropean Driving Cycle (NEDC), where it produces only 90 g/km.

n SDC Suspension Control System. The SDC Synaptic DampingControl developed together with Magneti Marelli is a low-costapproach to controlled suspension damping. Usingelectronically controlled shock absorbers, the mechatronicdevice improves vehicle handling and ride comfort while makingit easier to control. It also provides enhanced safety, as it isintegrated with the car’s ABS and VDC Vehicle Dynamic Controlsystems.

At December 31, 2006, the Group had 172,012 employees,compared with 173,695 at December 31, 2005. Duringthe year around 18,600 new employees were hired, whilea total of around 19,300 employees left the Group. Changesin the scope of consolidation of the Group entailed a net staffdecrease of approximately 1,000 employees, mainly as a resultof the sale by Teksid of the French company SBFM, the saleof B.U.C. – Banca Unione di Credito and of Fiat Auto’sfinancial services following the creation of the joint ventureFAFS with Crédit Agricole.As regards recruitment, over 900 recent university graduateswere added to Group staff, mainly in engineeringdepartments. The Group’s high skill staff (“professional”)totalled approximately 25,000, 44% of whom work outsideItaly.

Evolution in the organisational and managerial structure In 2006, Fiat continued to strengthen its managementorganisation. It continued to attract managers from outsidethe Group to cover vacant positions. A total of 137 managerswere hired from outside the Group, five of whom wereselected to fill top positions at the Group’s Sectors. In themeantime, focus on internal development of human resourcescontinued. This included mobility between the differentbusiness sectors. Expanded use of leadership assessmentsat the managerial as well as non-managerial level madea significant contribution to spread the model introducedin 2004.

Accelerated growth of the most talented internal resourceswas supported by directly involving the company’s top leadersat talent management meetings. These gatherings serveto identify individuals and define their development plans.

At the organisational level, 2006 brought confirmation of theguidelines on which the new Fiat corporate culture is based.They reflect two strategic approaches to the business:on the one hand, the unity of the Group, and on the otherhand the specific characteristics of the operating sectorsin their respective businesses.

Report on Operations Research and Innovation20

Human ResourcesTraining The Group invested approximately 95 million euros in trainingprogrammes designed to support the operations of the Groupand the professional development of its employees. Isvor Fiat provided training, consulting, and professionalsupport programs for a total of 18,505 classroom/training days.An additional 24,685 users received a total of 118,699 hoursof Web-based distance learning support.

Grants and Scholarships The Fiat Grants and Scholarships program, which was createdto help the children of active employees in Italy and in othercountries in which the Group has a significant presence, iscontinuing with considerable success. This initiative wasextended to China in 2006.In 2006, Fiat awarded 636 grants, 185 to students in Italy and451 to students in other countries, at a total cost of 1,072,900euros.

Industrial relationsIn 2006 a constant dialogue was maintained with trade unionsand representatives of employees at the company level inorder to find consensus solutions to handle the consequenceson workers of measures taken to respond to market needs,improve competitiveness, flexibility, and organisationalefficiency. Collective bargaining at the various levels was alsointense, allowing the trade unions to reach major agreementsdefining pay conditions and rules in the various countrieswhere the Group operates.

Social dialogue At the European level, issues concerning the condition of theFiat Group, especially those that have a transnational impact,were subject of information and consultation with themembers of the Fiat Group European Works Council (EWC),as required under EU Directive 45/94/EC. The Fiat Group EWC,which represents the employees of Group companies locatedin the European Union, was established in 1997 and iscomprised by 30 representatives of the various countriesin proportion to the current employment distribution ofthe Fiat Group in Europe.

Report on Operations Human Resources 21

n Control software development. Elasis assisted CNH indesigning and developing the control unit for the Cobratractor’s continuously variable transmission, and workedalongside Ferrari in designing and testing traction controlsoftware and in designing a prototype vehicle ride heightcontrol system. In addition, Elasis helped set up a dedicatedHardware-In-the-Loop lab for testing electronic control unitsof engines, and cooperated in testing electronic control unitsof Formula 1 racers.

n New HIL Hardware-in-The-Loop simulation models. Elasisadapted the hardware and software used in the HIL VirtualCar simulator to two models now being developed by FiatAuto: the new Fiat 500 and the Minicargo. For Magneti MarelliElectronic Systems, Elasis developed an HIL simulator tovalidate body computer software.

n Fire engines. In 2006, Elasis continued its development andproduct engineering work on Fire series engines. This workfocused on reducing consumption and toxic emissions to meetEuro 5 limits, on increasing performance, on improving qualityand reliability, and on cutting costs. During the year, the Fire1.4-litre 16-valve Starjet engine was put into production.Installed on the Fiat Grande Punto, the new engine combinesexcellent fuel economy with sparkling performance. Productengineering work was also completed on the new 1.4-litre 16-valve turbocharged unit that entered production in February2007, and on the new naturally aspirated Fire 1.4-litre 16-valveMultiair engine.

n Mobility and traffic safety. In this area, Elasis concentratedits attention on efforts to increase its know-how, and onparticipating in European Union and national projects. Theformer included TRACE (Traffic Accident Causation in Europe)a project which aims to identify the most common causes oftraffic accidents and assess the effectiveness of existing safetysystems. In Italy, Elasis embarked on partnerships with theprovincial administrations of Milan, Mantua and Macerataand with the Municipality of Sorrento. These initiatives hopeto make streets and roads safer by auditing and analysingtraffic accidents.

The meeting with the EWC Selected Committee was heldin May. The Group CEO, Sergio Marchionne, spoke at theannual plenary meeting held on November 13 and 14, 2006,when he presented the results achieved, objectives andstrategies of the Group for future years.

In Italy, constructive dialogue continued with the trade unionsat the national and local level. Representatives of employeeswere provided with constant updates on the evolution of theFiat Group relaunch and development plan, initiatives takento achieve set objectives, programs to renew the productrange, and production allocations. The meeting held at the Mirafiori Motor Village on June 28, 2006was of key importance. Sergio Marchionne presented an updateon Group performance, the results achieved and objectives to berealised. He pointed out that the improved situation had madeit possible to maintain production activity at plants in Italy andcreated the conditions for renewing the Group SupplementalCollective Agreement. This agreement was formally signedby the Company and the trade unions at that meeting. Additional updates on the Group’s growth prospects werecommunicated to the trade unions upon presentation of the2007-2010 Plan targets at the “Fiat Investor & Analyst Meeting”held on November 8 and 9, 2006. The production andemployment implications of the Plan were then discussed atthe meeting with trade unions on December 15, 2006, whenthe various Sectors illustrated their individual financial targetsand product renewal and investment plans, which represent thepremise for assuring full use of Group resources in Italy. Theseforecasts made it possible to reach the labour agreement onDecember 18, 2006 that shares, on the one hand, the need toovercome remaining overstaffing situations, through “mobilitàlunga” (long-term mobility benefit to bridge the period priorto retirement) for 2,000 Group employees. On the other hand,it expresses the commitment made by the trade unions tosupport implementation of actions to organise work, workshifts, and work schedules as necessary to increase use ofthe production capacity and thus employment.

Management of production requirementsThe improved market situation and higher sales in mostSectors entailed the need to increase production volumes,which were generally tackled through use of overtime work

Report on Operations Human Resources 23

In Italy, metalworking companies ended in Januarynegotiations for a two-year renewal of the compensationprovisions of the National Collective Labour Agreement forMetalworkers (white and blue collar). This contract, whichcovers about 74,000 of the Fiat Group’s employees, expiredat the end of 2004. Negotiations between Federmeccanica(a national organisation that represents Italian metalworkingindustry) and the national trade unions Fim-Cisl, Fiom-Cgil,Uilm-Uil and subsequently Fismic were particularly longand challenging. Only an agreement to extend the validityof the new contract by six months (i.e., until June 30, 2007)succeeded in breaking a stalemate in negotiations at thebeginning of 2006. When fully operational, the agreementsigned on January 19, 2006 will provide an overall increasein compensation of about 6%, as follows: an average monthlywage increase of 100 euros (implemented in three stages: 60euros beginning in January 2006, 25 euros in October 2006and 15 euros in March 2007) plus a lump-sum payment of 320euros for 2005.

On June 28, 2006, after just over a month of negotiationsand without strikes, the agreement for renewal of the FiatGroup Supplemental Agreement was signed with the Fim-Cisl,Fiom-Cgil, Uilm-Uil, Fismic, and Ugl trade unions.This agreement applies to most of the Group’s metalworkingsector companies operating in Italy and defines additional payconditions and rules with respect to those envisaged by theNational Collective Bargaining Agreement for Metalworkers.The new agreement recognised the contribution madeby workers to improving the situation of the Group, envisagingan increase in the annual performance bonus – an annualbonus tied to Group performance – according to theachievement of profitability targets. The June agreementalso established the terms and conditions for applying theprofessional Apprenticeship Agreement at the Fiat Group.

Outside Italy, the principal collective bargaining activitiesconducted at the Group level in 2006 include: the annualnegotiations held in France, which resulted in pay increasesof between 2% and 3% according to the different companies,and the agreements made in most Group companies in Poland.In Germany, collective bargaining was conducted at the levelof each Land for renewal of the metalworking sectoragreement, which is applied by most of the Group companies

Report on Operations Human Resources22

and temporary workers. In order to increase the rate of plantuse, work shifts distributed over six days of the week wereimplemented at the Melfi (SATA S.p.A.), Pratola Serra (FMAS.r.l.), and Termoli (Fiat Powertrain Technologies S.p.A.) plants. In contrast, less and less recourse was made to the CassaIntegrazione Guadagni (Temporary Layoff Benefits Fund)over the course of the year. Recourse to the “Cassa Integrazione Straordinaria” (Longer-termTemporary Layoff Benefits Fund) for the reorganisation of theFPT Mirafiori plant concluded in autumn 2006, following thereturn to work by employees within the envisaged deadlines. At December 31, 2006, a total of 234 employees fromthe administrative, technical, and sales department of FiatAuto, at Mirafiori, and 324 at Arese were still receiving benefitsunder “Cassa Integrazione Straordinaria in deroga” (a waiverfor the Longer-term Temporary Layoff Benefits Fund).

Outside Italy, the plants in Brazil and Poland in particularwere affected by the need to increase plant output rates.This involved extensive use of overtime work, which in certaincases exceeded 10% of the normal schedule, an increasein the number of work shifts, and the hiring of temporaryworkers.Agreements for work shift flexibility according to fluctuationsin production requirements were applied in Germany (Iveco),Belgium (CNH), and Poland (CNH).

Restructuring and production streamlining measures were morelimited. Streamlining of excavator production was particularlysignificant in this context, resulting in the halt of these activitiesat the CNH plant in Berlin. The employment impact of thismeasure was defined in “reconciliation of interests”agreements and the September 2006 social plan, which endeda labour dispute that had lasted approximately six months.

Collective bargainingWith regard to collective bargaining involving compensationissues, the agreements reached with the trade unions callfor wage increases that are generally in line with or slightlyhigher than the rate of inflation. The purpose of theseagreements was to help employees preserve their purchasingpower and link any further wage increases to the achievementof the targets to improve the Company’s performance.

operating in that country. The new agreement envisagedaverage wage increases of about 3%. In Brazil, increases similar to those envisaged at other largegroups were applied, in addition to annual bonuses of varyingamounts according to company results.

Labour disputes were down sharply from 2005 and involvedspecific situations, such as the dispute in Berlin, or episodesof small-scale labour unrest at certain production plants onspecific, limited problems.

Introduction

Principal Transactions that affected the Scope of Consolidation in 2006 n The procedure for the sale of the subsidiary Atlanet S.p.A.to the British Telecom group was for the most part finalisedin the first quarter of 2006 on receiving the approval of theItalian Guarantor Authority for Competition and the Market.The transaction was completed when the businesses in Polandand Brazil were sold during the second half of 2006.

n On August 30, 2006, Teksid S.p.A. sold 100% of the interestit held in Société Bretonne de Fonderie et Mecanique.

n On August 31, 2006, Fiat sold its holding in Banca Unionedi Credito (B.U.C.) to BSI (a company of the Generali Group).

n On December 28, 2006 Fiat Auto and Crédit Agricolecompleted the transaction for the creation of a 50/50 jointventure, Fiat Auto Financial Services (FAFS), which will handleFiat Auto’s main financing activities in Europe (retail autofinancing, dealership financing, and long-term car rental andfleet management). In particular: Fiat Auto, upon exercise ofits call option, purchased from Synesis Finanziaria 51% of FidisRetail Italia (a company controlling the Fiat Auto Europeanretail financing activities) which then changed its corporatename into Fiat Auto Financial Services. FAFS acquired certainFiat Auto subsidiaries active in the European Fiat Auto dealerfinancing and renting business. Fiat Auto sold to Sofinco, thewholly owned consumer credit subsidiary of Crédit Agricole,50% of the share capital of FAFS.

These changes in the scope of operations do not havea significant overall impact on the comparability of the datafor the two reference periods. Nevertheless, analyses of boththe Group as a whole and the individual areas highlightthe respective effects.

Report on Operations Financial Review of the Group24

During 2006, Fiat raised its stake in Ferrari from 56% to 85%;description of related transactions is presented in the Notesto the Financial Statements. In addition, it should be noted thaton December 6, 2006, the Fiat Group and Norsk Hydro reachedan agreement for the sale of their interests in MeridianTechnologies Inc., 51% and 49% respectively, to a consortiumof investors headed by the Swiss holding company Estatia AG.Closing of the transaction is subject to approval by competentauthorities.

Starting January 1, 2006 reporting of certain Business Areasof the Group was redefined as follows.

The Fiat Powertrain Technologies Sector is no longer includedin the Automobiles Business Area since it no longer comprisesonly the passenger vehicles engine and transmissions activities– over which Fiat regained control in May 2005 following thetermination of the Master Agreement with General Motors –but also the industrial powertrain activities that were includedin the Iveco Sector until December 31, 2005.In accordance with IAS 14 – Segment Reporting, the figuresfor 2005 have consequently been reclassified by assigningthe former Iveco powertrain activities to Fiat PowertrainTechnologies (FPT); the Iveco Sector, on the other hand,no longer includes these activities. From the beginningof 2006, FPT also encompasses the C.R.F. powertrain activities.Starting from January 1, 2006 the Fiat Powertrain TechnologiesSector is included in the Components and Production SystemsBusiness Area and, therefore, from the same date,the Automobiles Business Area comprises Fiat Auto (the Fiat,Alfa Romeo, Lancia and Fiat Light Commercial Vehiclesbrands), Maserati and Ferrari.

Report on Operations Financial Review of the Group 25

Financial Review of the Group

Operating Performance of the Group


Net revenues 51,832 46,544Cost of sales 43,888 39,624Selling, general and administrative costs 4,697 4,513Research and development costs 1,401 1,364Other income (expenses) 105 (43)Trading profit 1,951 1,000Gains (losses) on the disposal of investments 607 905Restructuring costs 450 502Other unusual income (expenses) (47) 812Operating result 2,061 2,215Financial income (expenses) (576) (843)Unusual financial income – 858Result from investments: 156 34- Net result of investees accounted for using the equity method 125 115- Other income and expenses from investments 31 (81)Result before taxes 1,641 2,264Income taxes 490 844Result from continuing operations 1,151 1,420Result from discontinued operations – –Net result for the year 1,151 1,420Attributable to:Equity holders of the parent 1,065 1,331Minority interests 86 89

Financial Review of the Group

In the review that follows, net revenues and trading profit arediscussed by single Business Area/Sector; the other data referto the Group as a whole.

Net revenuesIn 2006 the Fiat Group recorded net revenues of 51,832 millioneuros, up 11.4% from 2005. The increase is largely attributableto the positive contribution of Fiat Auto and Iveco. Revenuesalso increased at CNH and the Components and ProductionSystems Business Area.

Revenues by Business Area

(in millions of euros) 2006 2005 % change

Automobiles (Fiat Auto, Maserati, Ferrari) 25,577 21,275 20.2Agricultural and Construction Equipment (CNH-Case New Holland) 10,527 10,212 3.1Trucks and Commercial Vehicles (Iveco) 9,136 8,483 7.7Components and Production Systems (FPT, Magneti Marelli, Teksid, Comau) 12,366 10,727 n.s.Other Businesses (Services, Publishing and Communications, Holding companies and Other companies) 1,581 1,618 -2.3Eliminations (7,355) (5,771) n.s.Total for the Group 51,832 46,544 11.4

n Maserati had revenues of 519 million euros, down 2.6% fromthe previous year, which had benefited from the sales of thespecial MC12 street version, no longer sold in 2006.Conversely, total volume grew due to an increase in sales ofthe Coupé and Spyder models.

n Ferrari recorded revenues of 1,447 million euros. The 12.3%increase from 2005 is largely attributable to the success of theF430 and 599 GTB Fiorano models. Revenues were alsoboosted by sales in the Middle East and Far East markets.

Agricultural and Construction EquipmentCNH – Case New Holland had revenues of 10,527 million euros,up 3.1% from 2005 (+2.4% on a comparable currency basis).Better pricing and higher volume of construction equipmentwere partially offset by a decrease in deliveries of agriculturalequipment.

In 2006 the global market for agricultural equipment expandedby 9%, with contrasting trends across the various regions;volumes decreased slightly in Latin and North America, whilethey were up slightly in Western Europe and significantly in theRest of the World markets. Against this backdrop, CNH tractorshipments were down in North America and Rest of Worldmarkets, stable in Western Europe, and up in Latin America.Combine harvester volumes were down in all markets exceptRest of the World markets.

The global construction equipment market expanded by 11%from 2005, with growth in all markets except North Americawhere the market was stable. Against this background, CNHunit shipments increased (+3.4%) in all markets except NorthAmerica.

Trucks and Commercial VehiclesAs previously mentioned, for both fiscal years the figures ofthe Trucks and Commercial Vehicles Sector (Iveco) are shown

Report on Operations Financial Review of the Group 27Report on Operations Financial Review of the Group26

n In 2006 Fiat Auto recorded net revenues of 23,702 millioneuros, up 21.3% from 2005, due to the significant increasein volumes and positive exchange rate impacts.

Trading performance throughout the year was positivelyimpacted by the growing success of new models, and inparticular: the Fiat Grande Punto and the Panda, with its newCross and 100 HP versions, the Alfa Romeo 159 (sedan andSportwagon) and the Brera, the Lancia Ypsilon and the NewYpsilon, as well as the light commercial vehicles New Ducatoand the New Doblò.

In 2006 Fiat Auto delivered a total of 1,980,300 units, up 16.7%from 2005. A total of 1,289,600 units were delivered in WesternEurope, for an increase of 17.2%.

The increase in deliveries reached significant levels in almostall of the key European countries, with growth rates faroutpacing the market, as in Italy (+17.5% with respect to 2005deliveries) and Germany (+21.3%), or realised in decliningmarkets, such as Great Britain where deliveries increasedby 42.8% and France (+10.9%). The only exception was Spainwhere deliveries were impacted by weak demand anddecreased slightly (-1.0%). Fiat Auto had a 30.7% share of theItalian car market, an increase of 2.7 percentage points from2005, and 7.6% in Western Europe (+1.1 percentage points).

In Brazil, Fiat Auto exploited the positive performance ofthe local market and increased its sales by 15% from 2005,achieving a 25.3% share of the car market (+0.9 percentagepoints). In Poland, where demand increased slightly, Fiat Autovolume decreased by 2.3%.

excluding the powertrain activities, which were transferred tothe Fiat Powertrain Technologies Sector as of January 1, 2006.

Iveco revenues totalled 9,136 million euros in 2006, a 7.7%increase from 2005, as a result of higher sales volumes andbetter pricing.

In 2006 Iveco delivered a total of 181,500 vehicles, 17,600of which with buy-back commitments, up 5.2% from theprevious year. In Western Europe, within the context of anoverall positive market (+2.3%), deliveries totalled 135,100units, up 3.2% from 2005. The Sector recorded significantincreases in Germany (+21%) and Spain (+7.1%), againstdecreased in Italy (-5.1%) and Great Britain (-9.9%) wheredemand declined. Deliveries were particularly high in EasternEurope (+25%), Africa and the Middle East, while volumeswere substantially stable in Latin America.

Iveco sales also benefited from the market’s interest in theNew Daily, launched in late May.

In 2006 Iveco’s share of the Western European marketremained substantially unchanged at 10.7%. In particular, thelight-range Daily confirmed its position as the top seller in the3.5 ton segment while, in the medium segment, the Eurocargoremained co-leader with over 25% of the market.

Components and Production SystemsThe Components and Production Systems Business Areahad revenues of 12,366 million euros in 2006, an increase of 8%on a comparable basis. Revenues increased at Fiat PowertrainTechnologies (+11% on a comparable scope of operations) andat Magneti Marelli (+10.5%), against a decline recorded at Comau(-18.6%) due to a sharp slowdown in demand for its services.The decrease recorded at Teksid (-5.5%) is attributable to thedifferent scope of consolidation (+3.5% on a comparable basis).

A detailed review of net revenues by Business Area/Sectoris provided below.

AutomobilesIn 2006 the Automobiles Business Area recorded net revenuesof 25,577 million euros; the 20.2% increase from 2005 was

mainly driven by the significant growth recorded at Fiat Auto.Revenues also improved at Ferrari (+12.3%), while Maseratirecorded a slight decline (-2.6%).


Fiat Auto 23,702 19,533 21.3Maserati 519 533 -2.6Ferrari 1,447 1,289 12.3Eliminations (91) (80) n.s.Total 25,577 21,275 20.2


Fiat Powertrain Technologies 6,145 4,520 n.s.Components (Magneti Marelli) 4,455 4,033 10.5Metallurgical Products (Teksid) 979 1,036 -5.5Production Systems (Comau) 1,280 1,573 -18.6Eliminations (493) (435) n.s.Total 12,366 10,727 n.s.


Services (Business Solutions) 668 752 -11.2Publishing and Communications (Itedi) 401 397 1.0Holding companies and Other companies 512 469 9.2Total 1,581 1,618 -2.3


n Fiat Powertrain Technologies (FPT) revenues increasedfrom 4,520 million euros in 2005 (referring to the powertrainoperations previously consolidated in the Iveco Sector and,starting from May 2005, to the powertrain operations that weretransferred to FPT following the termination of the MasterAgreement with General Motors) to 6,145 million euros in 2006(an increase of 11% on a comparable basis). Part of FPT’soutput was sold to other Group Sectors, while sales to thirdparties and joint ventures represented 26% of revenues in 2006.

In 2006 revenues of the Passenger & Commercial Vehiclesproduct line totalled 3,447 million euros compared with 1,966million euros recorded in the May-December 2005 period. Theproduct line sold 2,328,000 engines, approximately 22% ofwhich were diesel engines sold to General Motors and Suzuki,and 1,695,000 transmissions, mainly to Fiat Auto.

The Industrial & Marine product line had revenues of 2,678million euros in 2006 (+4.9% from 2005). 444,000 engines weresold (up 1.9%) mainly to Iveco (44%), CNH (19%) and for 24%to Sevel, the joint venture between Fiat Auto and the PSAGroup. The product line also sold 113,000 transmissions (-1.4%) and 262,000 axles (+9.3%).

n Magneti Marelli recorded revenues of 4,455 million eurosin 2006, an increase of 10.5% from 2005. Excluding the impactof the sale of the Suspension Systems manufacturing andassembly activities to Fiat Auto in the first half of 2006, theincrease in revenues was 14.2%. This positive performance

is attributable to higher sales of Fiat, Alfa Romeo and Lanciamodels and an increase of new applications on car modelsof the Group and third parties (online applications, hi-techproducts of the Lighting business area and Selespeedgearboxes).

n Teksid had revenues of 979 million euros, down 5.5% from2005 due to the sale of a French company (SBFM) operatingin the Cast Iron business. On a comparable basis, revenuesincreased by 3.5% reflecting higher volumes at the Cast IronBusiness Unit (+1.5% on a comparable basis) and positiveexchange rate effects, which offset lower volumes at theMagnesium Business Unit (-6.2%) attributable to a slowdownin its reference markets, in particular that of SUVs in NorthAmerica.

n Comau had revenues of 1,280 million euros. The 18.6%reduction from 2005 is mainly attributable to the EuropeanBody-welding operations which were negatively impactedby difficult trading conditions. Revenues also decreased, but toa lesser extent, at the European powertrain business lines andat Comau Pico in North America. Conversely, Service activitiesreported a revenue increase, especially in the Mercosur area.

Other BusinessesOther Businesses recorded an overall decrease of 2.3%from 2005 due to a reduction in the scope of consolidationof Business Solutions.

n Business Solutions recorded revenues of 668 million eurosin 2006, down 11.2% from 2005. The decrease was due toa change in the scope of consolidation, in particular the sale ofAtlanet (telecommunication services). On a comparable basis,revenues would have increased by approximately 11% due to ahigher level of services provided to Group companies. Servicesprovided to Fiat Group companies represented approximately68% of the Sector’s revenues.

n In 2006 Itedi had revenues of 401 million euros, up 1% from2005. The slight increase is mainly attributable to higheradvertising revenues at Publikompass.

Trading profitTrading profit totalled 1,951 million euros in 2006, nearlydouble the 1,000 million euros recorded in 2005, reaching 3.8%of revenues (2.1% in 2005). The most significant improvementswere recorded at the Automobiles Business Area (+650 millioneuros, of which +572 million euros from Fiat Auto) and at Iveco(+214 million euros). Only the Components and ProductionSystems Business Area recorded a decrease, attributable toComau’s negative performance.

Trading profit by Business Area

(in millions of euros) 2006 2005 Change

Automobiles (Fiat Auto, Maserati, Ferrari) 441 (209) 650Agricultural and Construction Equipment (CNH-Case New Holland) 737 698 39Trucks and Commercial Vehicles (Iveco) 546 332 214Components and Production Systems (FPT, Magneti Marelli, Teksid, Comau) 348 358 -10Other Businesses (Services, Publishing and Communications, Holding companies and Other companies) and Eliminations (121) (179) 58Total for the Group 1,951 1,000 951

Components and Production SystemsThe aggregate trading profit of the Components andProduction Systems Business Area, 348 million euros, was10 million euros lower than in 2005 as the decrease recorded

The breakdown of trading profit by Business Area/Sectoris illustrated below.

AutomobilesThe trading profit of the Automobiles Business Area improvedby 650 million euros, from a loss of 209 million euros in 2005


n Fiat Auto had a trading profit of 291 million euros in 2006,a strong improvement (+572 million euros) from the tradingloss of 281 million euros of 2005. This change is mainlyattributable to higher sales volumes and the positive impact ofa more favourable product mix due to the new models. Thehigher production volumes also permitted greater absorptionof fixed production costs. Cost-cutting measures continued in2006 due to purchasing efficiencies and containment ofgovernance costs. Conversely, higher volumes were supportedby greater commitment to marketing and sales networkdevelopment.

n In 2006 Maserati had a trading loss of 33 million euros, asignificant improvement (+52 million euros) from the tradingloss of 85 million euros recorded in 2005, attributable to majorefficiency gains.

n Ferrari had a trading profit of 183 million euros in 2006,up 26 million euros from the trading profit of 157 million eurosof 2005. The improvement is mainly attributable to an increasein sales volumes and efficiency gains, which were partiallyoffset by higher research and development expenses.

Agricultural and Construction EquipmentIn 2006, CNH - Case New Holland had a trading profit of 737million euros, an increase of 39 million euros from the 698million euros of 2005. Trading margin reached 7% (6.8% in2005). Net of one time healthcare renegotiation benefits inNorth America (25 million euros in 2006 and 83 million eurosin 2005), CNH trading profit would have increased by 97million euros due to higher construction equipment volumes,better pricing and production costs efficiency gains, partiallyoffset by a reduction in volumes of agricultural equipment.

Trucks and Commercial VehiclesIveco had a trading profit of 546 million euros, 6% of revenues,a significant improvement (+214 million euros) from the 332million euros of 2005, when trading margin was 3.9%. Theincrease is mainly attributable to higher sales volumes, betterpricing and efficiency gains on materials, production andgovernance costs resulting from the streamlining programundertaken in 2005.

n Fiat Powertrain Technologies had a trading profit of168 million euros in 2006, against a trading profit of 109million euros in 2005. The increase is mainly attributable topurchasing and manufacturing efficiencies which more thanoffset higher raw material prices, mainly aluminium andmineral oils. A different scope of activities also positivelycontributed to the improvement.

n Magneti Marelli posted a trading profit of 190 millioneuros, 28 million euros higher than in 2005 (162 million euros).The improvement stemmed from higher sales volumes,streamlining of the cost base and efficiency gains whichmore than offset price pressures.

n Teksid closed 2006 with a trading profit of 56 million euros.The improvement from the trading profit of 45 million eurosof 2005 is due to efficiency gains.

n Comau’s trading loss was 66 million euros in 2006 withrespect to the trading profit of 42 million euros of 2005.A particularly sharp decline in volumes and margins wasreported by the Body-welding operations in Europe, butdecreases were also reported by all other Business Areas,except for the Service activities in the Mercosur area andthe Plastic Moulds operations in Europe.

Other BusinessesThe trading loss reported by the Other Businesses totalled 121million euros, an improvement of 58 million euros from 2005.


Services (Business Solutions) 37 35 2Publishing and Communications (Itedi) 11 16 -5Holding companies, Other companies and Eliminations (169) (230) 61Total (121) (179) 58

to a profit of 441 million euros in 2006. This reflected Fiat Auto’sperformance, higher profits at Ferrari, and lower lossesat Maserati.


Fiat Auto 291 (281) 572Maserati (33) (85) 52Ferrari 183 157 26Total 441 (209) 650

at Comau was not completely offset by improvements at theother Sectors. Trading margin stood at 2.8%, versus 3.3% in2005. Excluding Comau, trading profit would have increasedby 98 million euros with a trading margin of 3.7%.


Fiat Powertrain Technologies 168 109 59Components (Magneti Marelli) 190 162 28Metallurgical Products (Teksid) 56 45 11Production Systems (Comau) (66) 42 -108Total 348 358 -10

n Business Solutions had a trading profit of 37 million euros,against a trading profit of 35 million euros in 2005. On acomparable consolidation basis there would have been a4 million euro increase due to cost efficiency gains.

n In 2006, Itedi had a trading profit of 11 million euros, versusa trading profit of 16 million euros in 2005. The decrease isattributable to higher costs for the launch of the newnewspaper in November 2006, and higher paper costs.

n Holding companies, Other companies and Eliminationsclosed 2006 with a trading loss of 169 million euros. Theimprovement of 61 million euros from 2005 was mainly due tothe effect of the reorganisation and rationalisation of non-coreactivities and central structures.

Operating result In 2006, operating result was positive by 2,061 million euroscompared with an operating income of 2,215 million euros in2005. The 154 million euro decrease reflects lower net unusualincome of 1,105 million euros (110 million euros in 2006 and1,215 million euros in 2005) versus an improvement in tradingprofit of 951 million euros. In 2006, gains on disposalof investments totalled 607 million euros and were in partoffset by restructuring charges of 450 million euros and otherunusual expenses of 47 million euros. In 2005, unusual itemsincluded the gain from the termination of the MasterAgreement with General Motors of 1,134 million euros,and the Italenergia Bis gain (878 million euros), net ofrestructuring charges of 502 million euros and the balanceof other unusual income (expenses) which was negativeby 322 million euros.

Net gains on the disposal of investments, equal to 607 millioneuros, included the gain of 463 million euros resulting fromthe sale, within the framework of the agreement with CréditAgricole, of 50% of Fiat Auto Financial Services, the jointventure that handles Fiat Auto’s main financing activities inEurope, as well as the gains on the sale of B.U.C. – BancaUnione di Credito (80 million euros), Immobiliare NovoliS.p.A. (39 million euros), Machen Iveco Holding SA thatcontrolled 51% of Ashok Leyland Ltd (23 million euros),Atlanet S.p.A. (22 million euros) the residual interest in IPIS.p.A. (9 million euros), and the expected loss of 29 millioneuros in connection with the sale of the stake held in MeridianTechnologies Inc., that comprises Teksid’s Magnesiumactivities. Completion of the transaction is still subject toclosing of the financing to the purchaser by financialinstitutions. The 905 million euros recorded in 2005 includedthe gain (878 million euros) from the sale of the investment


counterparties to settle contractual guarantees granted onthe sale of businesses in previous years totalling 30 millioneuros and other minor items.

in Italenergia Bis to Electricité de France and the gain realisedupon the sale of Palazzo Grassi S.p.A. (23 million euros).

Restructuring costs totalled 450 million euros and weremainly attributable to Comau (179 million euros) in connectionwith the redefinition and restructuring of the perimeter of theSector’s operations, CNH (145 million euros), Fiat PowertrainTechnologies (60 million euros), Magneti Marelli (16 millioneuros), Business Solutions (12 million euros).

In the previous year, these costs, totalling 502 million euros,stemmed mainly from restructuring of the Sector’s centralorganisation and several operations outside Italy of mostGroup Sectors. The most significant amounts wereattributable to Fiat Auto (162 million euros) also as a resultof restructuring of the Fiat-GM Powertrain activities (the jointventure unwound at the beginning of May 2005), Iveco (99million euros), CNH (87 million euros), Comau (46 millioneuros), and Magneti Marelli (33 million euros).

Other unusual income (expenses) was negative by 47 millioneuros, of which 26 million euros attributable to theimpairment of the goodwill of certain European companiesof Comau, resulting from the reshaping and restructuringof the perimeter of the Sector’s operations undertaken duringthe second half of the year and 17 million euros due to thereorganisation and rationalisation of relationships withGroup suppliers.

In 2005 this item was positive by 812 million euros andincluded the following: gain from the termination of theMaster Agreement with General Motors for 1,134 million euros(net of accessory costs); a gain of 117 million euros realisedupon final disposal of the real estate properties that had beensecuritised in 1998; expenses of 187 million euros related tothe reorganisation and rationalisation of both Group suppliers(started in 2004) and Fiat Auto dealers; Fiat Auto expensesof 141 million euros associated with platform rationalisationand production relocation; 71 million euros in expenses forthe indemnity recognised to Global Value for the unwindingof the joint venture with IBM; indemnities paid to

The 2005 operating result of Holding companies and Othercompanies included the gain of 878 million euros resultingfrom the disposal of the investment in Italenergia Bis and,under other unusual income, an amount of 1,134 millioneuros (net of ancillary costs) related to the General Motorssettlement.

Net resultNet financial expenses totalled 576 million euros in 2006, animprovement of 267 million euros from the 843 million eurosof 2005. The positive change is mainly attributable to the lowerlevel of net industrial debt of the Group, in particular theelimination of the charges on the Mandatory Convertible

Facility and on the financing connected with the Italenergia Bistransaction, which were reimbursed in September 2005, as wellas higher financial income of 56 million euros arising from theequity swap agreements on Fiat shares which had beenentered into to cover stock option plans. The financialcomponent of costs for pension plans and other employeebenefits totalled 166 million euros in 2006 (146 million eurosin 2005).

Fiscal 2005 had benefited from unusual financial incomeof 858 million euros resulting from the capital increaseof September 20, 2005 with the simultaneous conversionof the Mandatory Convertible Facility. The income representsthe difference between the subscription price of the sharesand their stock market price at the date of subscription.

The following table illustrates the components of operatingresult broken down by Sector:

Gains/Losseson the disposal Other unusual

Trading profit of investments Restructuring costs income (expenses) Operating result

(in millions of euros) 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Fiat Auto 291 (281) 461 – 9 162 (16) (375) 727 (818)Maserati (33) (85) – – – – – – (33) (85)Ferrari 183 157 – – – – – – 183 157Agricultural and Construction Equipment (CNH-Case New Holland) 737 698 – – 145 87 – – 592 611Trucks and CommercialVehicles (Iveco) 546 332 25 (10) 6 99 – (11) 565 212Fiat Powertrain Technologies 168 109 – – 60 20 (6) (8) 102 81Components (Magneti Marelli) 190 162 – – 16 33 1 (2) 175 127Metallurgical Products (Teksid) 56 45 (29) 5 4 14 3 (9) 26 27Production Systems (Comau) (66) 42 (1) (1) 179 46 (26) (3) (272) (8)Services (Business Solutions) 37 35 3 9 12 22 – (15) 28 7Publishing and Communications (Itedi) 11 16 1 – – 2 – (1) 12 13Holdings companies, Othercompanies and Eliminations (169) (230) 147 902 19 17 (3) 1,236 (44) 1,891Total for the Group 1,951 1,000 607 905 450 502 (47) 812 2,061 2,215

Investment income was 156 million euros in 2006, up from 34million euros in 2005. The component deriving from valuationof the companies according to the equity method rose by 10million euros, while the other components improved from anegative 81 million euros in 2005, which were impacted by 74million euros in risks and charges recognised for investmentsin China, to a positive balance of 31 million euros in 2006,also as a result of the higher amount of dividends received.

Result before taxes totalled 1,641 million euros in 2006,against income of 2,264 million euros in 2005. Net of changesin unusual items for both years, income before taxes improvedby 1,340 million euros due to the increase in trading profit(+951 million euros), lower net financial expenses for 267million euros and higher investment income for 122 millioneuros.

Income taxes totalled 490 million euros in 2006 and include149 million euros for IRAP and 56 million euros in incometaxes for previous years. The tax charge (IRAP excluded) for2006 was therefore equal to 285 million euros. In 2005 incometaxes totalled 844 million euros and included 277 million eurosfor the reversal of deferred tax assets posted at December 31,


Consolidated Statement of Cash FlowsThe consolidated statement of cash flows is presentedas a component of the Consolidated Financial Statements.

2004 by Fiat S.p.A. in connection with the income resultingfrom the termination of the Master Agreement with GeneralMotors, 116 million euros for IRAP, 332 million euros forcurrent and deferred tax charges primarily attributable tocompanies outside of Italy and 119 million euros in incometaxes for previous years.

Excluding IRAP, the Group’s effective tax rate was 32% in 2005and 21% in 2006. The reduction was caused primarily bygreater use of prior-year tax losses and temporary differencesfor which no deferred tax assets had been recognised in prioryears.

Net result for the year was 1,151 million euros in 2006, versus1,420 million euros in 2005. Excluding the impact of netunusual items, the Group would have posted a net loss of 376million euros in 2005 and a net income of 1,041 million eurosin 2006. Therefore, on a comparable basis, net incomeimproved by 1,417 million euros.

The portion of net result attributable to the equity holdersof the parent was positive by 1,065 million euros in 2006,against 1,331 million euros in 2005.

In 2006 cash flows from operating activities totalled 4,618million euros. Income cash flow, that is net income plus amortisation anddepreciation, dividends, changes in provisions and itemsrelating to sales with buy-back commitments, net of“Gains/losses and other non-cash items”, amounted to 3,806million euros, to which must be added the cash generated bythe decrease in working capital which, when calculated on acomparable consolidation and exchange rate basis, amountedto 812 million euros.

Cash flows used in investment activities totalled 1,390 millioneuros. Net of the reduction in securities held as current assets(223 million euros), investment activities used a total of 1,613million euros.

Investments in tangible assets (net of vehicles sold under buy-back commitments) and intangible assets totalled 3,789million euros (3,052 million euros in 2005), 926 million eurosof which referred to vehicles for long-term renting operations(409 million euros in 2005), while 813 million euros referredto capitalised development costs (656 million euros in 2005).

Investments totalled 1,617 million euros and mainly referred:

n for 893 million euros, to the repurchase of 28.6% of Ferrari and

n for 479 million euros, to the repurchase, upon exercise ofthe call option held by Fiat Auto, of 51% of Fidis Retail Italia,whose corporate name subsequently changed in Fiat AutoFinancial Services (FAFS), within the framework of the creationof the joint venture with Crédit Agricole. Concurrently, FidisRetail Italia was recapitalised by Fiat Auto for an amounttotalling 180 million euros.

In addition to investments during the period, receivables fromfinancing activities increased, absorbing 876 million eurosin liquidity. This increase is mainly attributable to the growthin financing extended by the financial services companies ofCNH, net of the collection of financial receivables from others,associated companies and sold companies.

Reimbursement of the financing disbursed by the centralisedcash management entity to the financial services companiessold by Fiat Auto upon creation of the joint venture Fiat Auto

A condensed version thereof as well as commentsare provided below.


A) Cash and cash equivalents at beginning of period 6,417 5,767B) Cash flows from (used in) operating activities during the period (a) 4,618 3,716C) Cash flows from (used in) investment activities (b) (1,390) (535)D) Cash flows from (used in) financing activities (c) (1,731) (2,868)

Translation exchange differences (173) 337E) Total change in cash and cash equivalents 1,324 650F) Cash and cash equivalents at end of period 7,741 6,417

of which: cash and cash equivalents included as Assets held for sale 5 –G) Cash and cash equivalents at end of period as reported in the consolidated financial statements 7,736 6,417

(a) In 2005 cash flow is shown net of, amongst other things, the unusual financial income of 858 million euros arising from the conversion of the Mandatory Convertible Facility and the gainof 878 million euros realised on the sale of the investment in Italenergia Bis.

(b) In 2005, cash flows from investment activities benefited, among other things, from the repayment of the loans granted by central treasury to the financial services companies sold by Ivecoas part of the transaction with Barclays (proceeds of approximately 2 billion euros) and from the effects of the unwinding of the joint ventures with General Motors (positive by approximately500 million euros).

(c) In 2005, cash flows used in financing activities excluded the repayment of the Mandatory Convertible Facility (3 billion euros) and the debt of approximately 1.8 billion euros connectedwith the Italenergia Bis transaction, as neither of these gave rise to cash flows.

Financial Services with Crédit Agricole resulted in receipts ofapproximately 3 billion euros, including Other changes, whichtotalled 3,078 million euros.

Proceeds from the sale of non-current assets totalled 1,591million euros and referred for approximately 940 million eurosto the proceeds (net of liquidity held by the financial servicescompanies that were transferred to the joint venture) realisedupon the sales of the investments transferred to the jointventure with Crédit Agricole, to which proceeds deriving fromthe sale of vehicles as part of long-term renting activities (290million euros) must be added; the remainder referred to thesale of B.U.C. – Banca Unione di Credito (net of the liquidity itheld), Atlanet S.p.A. and Sestrieres S.p.A., and of the interestsheld in Machen Iveco Holding SA (which held a shareholdingof about 51% in Ashok Leyland Ltd), Immobiliare Novoli S.p.A.,IPI S.p.A., and other minor sales.

Cash flows used in financing activities totalled 1,731 millioneuros. Cash collection from bonds issuances made during thefirst six months of the year (2 billion euros in notes issued byFiat Finance and Trade S.A. and USD 500 million in notesissued by Case New Holland Inc.) was more than offset by therepayment of bonds (for approximately 2.4 billion euros), thereduction of approximately 1.8 billion euros in bank loans andother financial payables.


Balance Sheet of the Group at December 31, 2006At December 31, 2006, total assets amounted to 58,303 millioneuros, a 4,151 million euro decrease with respect to 62,454million euros at December 31, 2005.

At December 31, 2006, Total Assets included assets reclassifiedunder “Assets held for sale” for 332 million euros mainlyrelated to the Metallurgical Products Sector (sale of MeridianTechnologies), the Services Sector (sale of Ingest Facility) andFiat Auto, for activities destined to be conveyed to the jointventure with Tata Motors in India.

In 2006, non-current assets decreased by 1,288 million euros.Net of the negative impact of changes in the translation ratesfor dollar denominated items (approximately 570 millioneuros), the decrease is mainly due to:

n the decrease in Leased assets, due to the deconsolidationof the financial services companies controlled by Fiat Autoand sold within the framework of the establishment of FAFS;

n the decrease in Property, plant, and equipment. This wascaused principally by the negative balance of investments,depreciation, disposals (mainly vehicles sold by Iveco withbuy-back commitments), to which must be added thedeconsolidation of the activities of B.U.C. – Banca Unionedi Credito (sold at the end of August 2006) and thereclassification under Assets held for sale of assets heldby the Companies/Sectors mentioned above.

These changes were partially offset by the increase inintangible assets due to goodwill (776 million euros) recognisedupon the acquisition by Fiat S.p.A. of part of the recently issuedshares of Ferrari S.p.A. in the second quarter of 2006,representing 0.44% of the capital stock of the company, aswell as exercise in the third quarter of 2006 of the call optionon 28.6% of Ferrari shares. Following these two transactions,Fiat’s stake in Ferrari S.p.A. rose from 56% to 85%.

At December 31, 2006, receivables from financing activitiestotalled 11,743 million euros, reflecting a decrease of 4.2 billioneuros from December 31, 2005. Net of the negative foreignexchange impact of approximately 0.9 billion euros, the saleof Fiat Auto’s financial services companies that are part of theabove-mentioned transaction with Crédit Agricole (3.4 billioneuros) and the sale of B.U.C. (0.9 billion euros), receivablesfrom financing activities showed an increase of 0.9 billioneuros.

The increase in financing extended to the dealer network andto the end customers of CNH which occurred in particular inthe first six months of 2006, was only partially offset by thecollection of financial receivables from associated companies,sold companies (Atlanet S.p.A.), and financial receivables fromothers.

Working capital, net of the items connected with the saleof vehicles with buy-back commitments, is negative by 838million euros, 589 million euros less than at December 31,2005, when working capital was negative by 249 million euros.

(in millions of euros) At 12.31.2006 At 12.31.2005 Change

Inventories (1) 7,553 7,133 420Trade receivables 4,944 4,969 -25Trade payables (12,603) (11,777) -826Other receivables/ (payables), accruals and deferrals (2) (732) (574) -158Working capital (838) (249) -589

(1) Inventories are shown net of the value of vehicles sold with buy-back commitments by Fiat Auto. (2) Other payables included in the balance of Other receivables/ (payables), accruals and deferrals exclude amounts due to customers corresponding to the buy-back price due upon expiration

of the related contracts and the amount of the fees paid in advance by customers for vehicles sold with buy-back commitments, which is equal to the difference at the date of signing thecontract between the sales price and the buy-back price and which is allocated over the term of the entire agreement.

If working capital is restated to include the items reclassifiedunder Assets and Liabilities held for sale, the decrease wouldtotal 678 million euros.

The increase in net inventories recorded in 2006 (+420 millioneuros, or 457 million euros if inventories recognised amongAssets held for sale were included) is mainly attributable tohigher levels of activity at Fiat Auto.

Trade receivables decreased by 25 million euros. If tradereceivables recognised among Assets held for sale areincluded, the balance would increase by 56 million euros.

At December 31, 2006, trade receivables, other receivables,and receivables from financing activities falling due after thatdate and sold without recourse, and therefore eliminated fromthe balance sheet in compliance with IAS 39 derecognitionrequirements, totalled 5,697 million euros (2,463 million eurosat December 31, 2005). This amount includes receivables,mainly from the sales network, sold to jointly-controlledfinancial services companies (FAFS) for 3,400 million eurosand associated financial services companies (Iveco FinancialServices, controlled by Barclays) for 661 million euros (710


The net financial position of the Fiat Group is presented inNote 28 to the Consolidated Financial Statements according toConsob’s requirements. Reconciliation of net financial positionand net debt is also provided in said Note.

Asset-backed financing decreased by 2,385 million euros in2006 mainly as a result of the deconsolidation of the Fiat Autofinancial services companies transferred to the joint venturewith Crédit Agricole (approximately 2 billion euros) andforeign currency translation differences (750 million euros)connected to the appreciation of euro against the USD.Excluding these changes, asset-backed financing would haveincreased by approximately 0.4 billion euros.

In 2006, other debt was lower by 3,188 million euros. Net ofdebt reclassified among liabilities held for sale for 33 millioneuros, the decrease is mainly attributable to thedeconsolidation of B.U.C. – Banca Unione di Credito, whosesale was finalised at the end of August, leading to a reductionof approximately 1.1 billion euros, in addition to the repaymentof bonds at maturity for approximately 2.4 billion euros, thenet reduction in bank loans and other debt for approximately1.8 billion euros, and foreign exchange translation differencestotalling approximately 300 million euros. Conversely, itshould be noted that during the first six months of 2006, theGroup completed a number of bond issuances that enabled itto refinance approximately 2.4 billion euros in debt, and inparticular:

n 6.625% Senior Notes with a face value of 1 billion eurosmaturing on February 15, 2013, issued by Fiat Finance & TradeLtd. and guaranteed by Fiat S.p.A., and placed on February10 at a price of 100%;

n the 500 million dollar Case New Holland Inc. bond issue(equal to 380 million euros) with a 7.125% yield and maturingon March 1, 2014. Guaranty is provided by CNH Global N.V.and the placement was completed on March 3;

n a 1 billion euro bond issue with a 5.625% yield and due onNovember 15, 2011. The offering closed on May 12 at a priceof 99.565. The notes, issued by Fiat Finance and Trade Ltd. aspart of the 15 billion euro Global Medium Term Notes program,are guaranteed by Fiat S.p.A.

million euros at December 31, 2005). The increase recordedduring 2006 is due to the deconsolidation of the financialservices companies of Fiat Auto conveyed in the above mentioned joint venture with Crédit Agricole.

The increase in inventories and trade receivables (+513 millioneuros if items recognised among Assets held for sales wereincluded) was more than offset by the increase in tradepayables, which grew by 826 million euros in 2006(approximately 1 million euros if trade payables recognisedamong liabilities held for sale were included) mainly due tohigher levels of activity at Fiat Auto and Iveco as well as therise in the liability balance of the item Otherreceivables/(Payables), accruals and deferrals (158 millioneuros, or 192 million euros if items recognised amongAssets/Liabilities held for sale were included) which is mainlyattributable to the collection of receivables from tax authorities.

At December 31, 2006 consolidated net debt (including netdebt reclassified to Assets/Liabilities held for sale) amountedto 11,836 million euros, 6,687 million euros less than the18,523 million euros at December 31, 2005.

(in millions of euros) At 12.31.2006 At 12.31.2005

Debt (20,188) (25,761)- Asset-backed financing (a) (8,344) (10,729)- Other debt (a) (11,844) (15,032)Debt included among liabilities held for sale (33) –Other financial liabilities (b) (105) (189)Other financial assets (b) 382 454Current financial receivables from jointly controlled financial services entities (c) 143 –Current securities 224 556Cash and cash equivalents 7,736 6,417Cash and cash equivalents included among assets held for sale 5 –Net debt (11,836) (18,523)- Industrial Activities (1,773) (3,219)- Financial Services (10,063) (15,304)

(a) The amounts of “Other debt” and “Asset-backed financing” at December 31, 2005 differ from those published in the Consolidated Financial Statements at December 31, 2005 due to thereclassification described in the Notes to the Consolidated Financial Statements.

(b) This item includes the asset and liability fair values of derivative financial instruments.(c) This item includes current financial receivables from the new joint venture Fiat Auto Financial Services.

The cash position (cash, cash equivalents and currentsecurities, including those reclassified to Assets held for salefor 5 million euros), which totalled 7,965 million euros atDecember 31, 2006, increased by 992 million euros comparedto 6,973 million euros at the beginning of the year. In additionto the resources generated by operations (net of investments),the increase reflects the benefit of approximately 3 billioneuros deriving from conclusion of the agreement between FiatAuto and Crédit Agricole, which were partially offset by flowsused to reduce gross debt over the course of the year.

At December 31, 2006, “Cash and cash equivalents” included627 million euros (706 million euros at December 31, 2005)specifically allocated to service the debt for securitisationstructures, mainly recognised among “Asset-backedfinancing.”

Industrial Activities and Financial ServicesActivities: Performance in 2006The following analyses of the consolidated income statement,balance sheet and statement of cash flows present separatelythe consolidated data of the Group’s Industrial Activities andFinancial Services activities. The latter include the retailfinancing, leasing, and rental companies of Fiat Auto, CNH andIveco and the banking activities performed by B.U.C. – BancaUnione di Credito until August 2006 when it was sold. Startingfrom the end of 2006 financial services activities are performedby Ferrari as well.

Principles of analysisThe separation between Industrial Activities and FinancialServices activities is made by preparing specific sub-consolidated financial statements on the basis ofthe normal business performed by each Group company.


Operating Performance by Activity Segment2006 2005

Industrial Financial Industrial Financial(in milioni di euro) Consolidated Activities Services Consolidated Activities Services

Net revenues 51,832 50,297 2,607 46,544 45,350 2,023Cost of sales 43,888 42,934 2,026 39,624 39,006 1,447Selling, general and administrative costs 4,697 4,416 281 4,513 4,261 252Research and developments costs 1,401 1,401 – 1,364 1,364 –Other income (expenses) 105 109 (4) (43) (37) (6)Trading Profit 1,951 1,655 296 1,000 682 318Gains (losses) on the disposal of investments 607 575 32 905 906 (1)Restructuring costs 450 448 2 502 501 1Other unusual income (expenses) (47) (45) (2) 812 812 –Operating result 2,061 1,737 324 2,215 1,899 316Financial income (expenses) (576) (576) – (843) (843) –Unusual financial income – – – 858 858 –Result from investments: (*) 156 95 61 34 1 33- Net result of investees accounted for using the equity method 125 64 61 115 82 33- Other income (expenses) from investments 31 31 – (81) (81) –Result before taxes 1,641 1,256 385 2,264 1,915 349Income taxes 490 392 98 844 744 100Net result 1,151 864 287 1,420 1,171 249Result from intersegment investments – 287 – – 248 –Net result for the year 1,151 1,151 287 1,420 1,419 249

(*) This item includes investment income as well as writedowns and upward adjustments in non-intersegment investments accounted for by using the equity method.

The investments held by companies belonging to one activitysegment in companies included in another segmentare accounted for using the equity method.

To avoid a misleading presentation of net income, the effectof this accounting is classified in the income statement item“Result from intersegment investments.”

The Holding companies (Fiat S.p.A., IHF-Internazionale HoldingFiat S.A., Fiat Partecipazioni S.p.A. and Fiat NetherlandsHolding N.V.) are classified under Industrial Activities.

The sub-consolidated financial statements of IndustrialActivities also include companies that operate centralisedcash management activities, i.e. those which raise financialresources on the market and finance Group companies withoutproviding financial services support to third parties.

Industrial ActivitiesIn 2006, net revenues for Industrial Activities totalled 50,297million euros, up 10.9% from the previous year, as a resultof the growth posted by Fiat Auto and Iveco, as well as by theComponents and Production Systems Business Area and CNH.

Industrial Activities reported a trading profit of 1,655 millioneuros in 2006, against a trading profit of 682 million euros in2005. The improvement is mainly attributable to Fiat Auto,and the growth posted by Iveco and CNH.

The operating result of Industrial Activities was 1,737 millioneuros compared to operating income of 1,899 million euros in

2005. The 162-million-euro decrease reflects lower net unusualincome of 1,135 million euros against the improvement intrading profit (+973 million euros). Unusual income for 2006totalled 82 million euros and included, among other things, thegain of 429 million euros arising from the sale of 50% of FAFS(the residual 34 million euros were recorded within theperimeter of Financial Services activities), net of restructuringcosts of 448 million euros and other unusual charges of 45million euros. In 2005, net unusual income totalled 1,217million euros and included in particular the unusual incomeof 1,134 million euros from the General Motors settlement,and the gain of 878 million euros on the sale of the investmentin Italenergia Bis.

Financial Services

Revenues


Fiat Auto 991 619 60.1Agricultural and Construction Equipment (CNH-Case New Holland) 1,061 879 20.7Trucks and Commercial Vehicles (Iveco) 508 457 11.2Holding companies and Other companies (1) 47 68 -30.9Total 2,607 2,023 28.9

(1) These amounts refer to the banking activities performed by B.U.C. – Banca Unione di Credito until August 2006 when it was sold.


The trading profit of Financial Services in 2006 was 296 millioneuros compared with 318 million euros in 2005:

n the decrease recorded at the Financial Services of Fiat Auto(trading profit was 56 million euros in 2006 versus 60 millioneuros in 2005) is mainly attributable to the contraction infinancing to suppliers and the results of the servicescompanies; in fact, in the renting business, the positive impactof the consolidation of Leasys virtually offset lower results byrenting companies outside of Italy;

n the trading profit of CNH’s Financial Services grew from235 million euros in 2005 to 249 million euros in 2006.The improvement reflects growth in the managed portfolio,In 2006 Financial Services reported net revenues of 2,607

million euros, up 28.9% from the 2,023 million euros of 2005due to the increases reported at Fiat Auto, Iveco and CNH,which were only partially offset by the impact of the sale ofB.U.C - Banca Unione di Credito, whose activities weredeconsolidated at the end of August 2006. In particular:

n the Financial Services of Fiat Auto had revenues of 991million euros, versus 619 million euros in 2005. The increaseprincipally reflects the change in the scope of operationsfollowing the consolidation of Leasys, full control of which wasacquired at the end of 2005. On a comparable basis, revenueswould have increased by 3.4% due to an increase in financing

activity to the dealer network which more than offset lowerfinancing activities to suppliers;

n CNH’s Financial Services reported revenues of 1,061 millioneuros, up 20.7% from 2005. This improvement reflects theincrease of the financed portfolio and a higher level of thereference interest rates;

n the Financial Services of Iveco had revenues of 508 millioneuros. In 2005 revenues amounted to 457 million euros andincluded activities whose sale started on June 1, 2005 as partof the Barclays transaction. The 11.2% increase is attributableto higher activity levels in Eastern Europe.

Trading profit


Fiat Auto 56 60 -4Ferrari (1) – -1Agricultural and Construction Equipment (CNH-Case New Holland) 249 235 14Trucks and Commercial Vehicles (Iveco) (18) 10 -28Holding companies and Other companies (1) 10 13 -3Total 296 318 -22

(1) These amounts refer to the banking activities performed by B.U.C. – Banca Unione di Credito until August 2006 when it was sold.

partially offset by higher financial expenses and greaterprovisions for doubtful accounts (especially relating to theBrazilian portfolio, due to the credit renegotiation programsponsored by the local government);

n Iveco’s Financial Services closed the year with a tradingloss of 18 million euros, compared with a trading profit of10 million euros in 2005. The 2005 trading profit included theprofit (9 million euros) reported in the first 5 months of theyear by the activities subsequently sold within the frameworkof the establishment of the joint venture with Barclays.On a comparable basis, the decrease (19 million euros)is mainly attributable to higher provisions connectedwith renting activities in Western Europe.

Balance Sheet by Activity SegmentAt 12.31.2006 At 12.31.2005

Industrial Financial Industrial Financial(in millions of euros) Consolidated Activities Services Consolidated Activities Services

Intangible assets 6,421 6,325 96 5,943 5,762 181- Goodwill 2,850 2,756 94 2,418 2,259 159- Other intangible assets 3,571 3,569 2 3,525 3,503 22Property, plant and equipment 10,540 10,528 12 11,006 10,961 45Investment property 19 19 – 26 26 –Investments and other financial assets 2,280 3,886 867 2,333 4,184 796Leased assets 247 7 240 1,254 4 1,250Defined benefit plan assets 11 11 – – – –Deferred tax assets 1,860 1,710 150 2,104 1,930 174Total Non-current Assets 21,378 22,486 1,365 22,666 22,867 2,446Inventories 8,447 8,390 57 7,881 7,809 76Trade receivables 4,944 5,068 178 4,969 4,856 341Receivables from financing activities 11,743 2,891 11,977 15,973 4,881 15,856Other receivables 2,839 2,806 58 3,084 2,922 243Accrued income and prepaid expenses 247 226 21 272 253 21Current financial assets 637 531 106 1,041 663 378- Current investments 31 31 – 31 31 –- Current securities 224 134 90 556 204 352- Other financial assets 382 366 16 454 428 26Cash and cash equivalents 7,736 6,706 1,030 6,417 5,517 900Total Current Assets 36,593 26,618 13,427 39,637 26,901 17,815Assets held for sale 332 332 – 151 151 –TOTAL ASSETS 58,303 49,436 14,792 62,454 49,919 20,261Total assets adjusted for asset-backed financing transactions 49,959 48,504 7,313 51,725 48,388 10,797Stockholders’ equity 10,036 10,036 2,395 9,413 9,409 2,479Provisions 8,611 8,471 140 8,698 8,499 199- Employee benefits (a) 3,761 3,750 11 3,950 3,925 25- Other provisions (a) 4,850 4,721 129 4,748 4,574 174Debt 20,188 11,555 11,836 25,761 13,782 16,915- Asset-backed financing (b) 8,344 932 7,479 10,729 1,531 9,464- Other debt (b) 11,844 10,623 4,357 15,032 12,251 7,451Other financial liabilities 105 98 7 189 180 9Trade payables 12,603 12,637 260 11,777 11,700 297Other payables 5,019 4,963 89 4,821 4,698 205Deferred tax liabilities 263 262 1 405 375 29Accrued expenses and deferred income 1,169 1,105 64 1,280 1,166 128Liabilities held for sale 309 309 – 110 110 –TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 58,303 49,436 14,792 62,454 49,919 20,261Total liabilities adjusted for asset-backed financing transactions 49,959 48,504 7,313 51,725 48,388 10,797

(a) The amounts at December 31, 2005 differ from those published in the Consolidated Financial Statements at December 31, 2005 due to the reclassification described in the Notes to theConsolidated Financial Statements.

(b) The amounts of “Other debt” and “Asset-backed financing” of the Group and the Financial Services Companies at December 31, 2005 differ from those published in the Consolidated FinancialStatements at December 31, 2005 due to the reclassification described in the Notes to the Consolidated Financial Statements.


Net Debt by Activity SegmentAt 12.31.2006 At 12.31.2005


Debt (20,188) (11,555) (11,836) (25,761) (13,782) (16,915)- Asset-backed financing (a) (8,344) (932) (7,479) (10,729) (1,531) (9,464)- Other debt (a) (11,844) (10,623) (4,357) (15,032) (12,251) (7,451)Debt included among liabilities held for sale (33) (33) – – – –Current financial receivables from jointly controlled financial entities (b) 143 143 – – – –Intersegment financial receivables – 2,559 644 – 4,594 342Financial payables net of intersegment balances and current financial receivables from jointly controlled financial entities (20,078) (8,886) (11,192) (25,761) (9,188) (16,573)Other financial assets (c) 382 366 16 454 428 26Other financial liabilities (c) (105) (98) (7) (189) (180) (9)Current securities 224 134 90 556 204 352Cash and cash equivalents 7,736 6,706 1,030 6,417 5,517 900Cash and cash equivalents included among assets held for sale 5 5 – – – –Net debt (11,836) (1,773) (10,063) (18,523) (3,219) (15,304)

(a) The amounts of “Other debt” and “Asset-backed financing” of the Group and the financial services companies at December 31, 2005 differ from those published in the Consolidated FinancialStatements at December 31, 2005 due to the reclassification described in the Notes to the Consolidated Financial Statements.

(b) This item includes current financial receivables due to Fiat Group companies by the FAFS Group.(c) This item includes the asset and liability fair values of derivative financial instruments.

“Financial payables” under Industrial Activities partly includefunds raised by the central cash management and transferredto financial services companies in support of their activity(represented under the item “Intersegment financialreceivables”).“Intersegment financial receivables” under Financial Servicesrepresent loans or advances to industrial companies, mainlyrelating to the sale of receivables by industrial to financialcompanies in transactions that do not comply with therequirements set out in IAS 39 for the recognition of thosesales, as well as any temporary cash deposited with the centralcash management. “Cash and cash equivalents” include 627 million euros atDecember 31, 2006 (706 million euros at December 31, 2005),mainly relating to financial services companies, allocated toservice the debt for securitisation structures and classified as“Asset-backed financing”.

At December 31, 2006, net debt of the financial servicescompanies showed a decrease of 5,241 million euros comparedto net debt at December 31, 2005. The decrease is mainlyattributable to the positive effects of the sale of the financialservices companies of Fiat Auto within the framework of thetransaction with Crédit Agricole (approximately 4.8 billioneuros) and of B.U.C. – Banca Unione di Credito (approximately0.8 billion euros), the operating performance (734 millioneuros), and to the translation effects of changes in foreignexchange rates (approximately 0.8 billion euros), in part offsetby capital expenditures carried out during the period (mainlyfor vehicles that had been leased out under operating leases),and growth in the investment portfolio.

Statement of Cash Flows by Activity Segment2006 2005


A) Cash and cash equivalents at beginning of period 6,417 5,517 900 5,767 4.893 873B) Cash flows from (used in) operating activities during the period:

Net result for the year 1,151 1,151 287 1,420 1,419 249Amortisation and depreciation (net of vehicles soldunder buy-back commitments) 2,969 2,639 330 2,590 2,392 198(Gains)/losses and other non-cash items (a) (568) (921) 66 (1,561) (1,923) 114Dividends received 69 180 1 47 132 3Change in provisions 229 251 (22) 797 816 (18)Change in deferred income taxes (26) 12 (38) 394 438 (43)Change in items due to buy-back commitments (b) (18) 4 (26) (85) (7) (74)Change in working capital 812 679 136 114 92 13Total 4,618 3,995 734 3,716 3,359 442

C) Cash flows from (used in) investment activities:Investments in:- Tangible and intangible assets (net of vehicles

sold under buy-back commitments) (3,789) (2,854) (935) (3,052) (2,636) (416)- Investments (1,617) (1,633) (7) (67) (152) (33)Proceeds from the sale of non-current assets 1,591 1,574 19 500 385 115Net change in receivables from financing activities (876) 149 (1,025) (251) 409 (660)Change in current securities 223 65 158 (159) (19) (140)Other changes (c) 3,078 2,257 822 2.494 2,252 244Total (1,390) (442) (968) (535) 239 (890)

D) Cash flows from (used in) financing activities:Net change in financial payables and other financialassets/liabilities (d) (1,730) (2,256) 526 (2,839) (3,159) 321Increase in capital stock (d) 16 16 21 – – 119Disposal of treasury stock 6 6 – – – –Dividends paid (23) (23) (112) (29) (29) (88)Total (1,731) (2,257) 435 (2,868) (3,188) (352)Translation exchange differences (173) (102) (71) 337 214 123

E) Total change in cash and cash equivalents 1,324 1,194 130 650 624 27F) Cash and cash equivalents at end of period 7,741 6,711 1,030 6,417 5,517 900

of which: cash and cash equivalents included amongAssets held for sale 5 5 – – – –

G) Cash and cash equivalents at end of period as reportedin the financial statements 7,736 6,706 1,030 6,417 5,517 900

(a) In 2005 this item included, among others, the unusual financial income of 858 million euros arising from the conversion of the Mandatory Convertible Facility and the gain of 878 million eurosrealised on the sale of the investment in Italenergia Bis.

(b) The cash flows for the two periods generated by the sale of vehicles under buy-back commitments, net of the amount already included in the result, are included in operating activities for theperiod in a single item which includes the change in working capital, capital expenditures, depreciation, gains and losses and proceeds from sales at the end of the contract term, relating toassets included in “Property, plant and equipment”.

(c) The item Other changes includes, for approximately 3 billion euros, reimbursement of loans extended by the Group’s centralised cash management to the financial services companies of FiatAuto transferred to the FAFS joint venture. In 2005, the item included, for approximately 2 billion euros, the repayment of the loans granted by the Group’s centralised cash management tothe financial services companies sold by Iveco and, approximately 500 million euros, the effects of the unwinding of the joint ventures with General Motors.

(d) During 2005, the item Increase in capital stock was stated net of the repayment of the Mandatory Convertible Facility (3 billion euros) and of debt of approximately 1.8 billion euros connectedwith the Italenergia Bis transaction, as neither of these gave rise to cash flows.

Report on Operations Financial Review of the Group 47

Statement of Changes in Net Industrial Debt


Net industrial debt at beginning of period (3,219) (9,447)- Net income 1,151 1,419- Amortisation and depreciation (net of vehicles sold under buy-back commitments) 2,639 2,392- Change in provisions for risks and charges and other changes (474) (544)Cash flows from (used in) operating activities during the period, net of change in working capital 3,316 3,267- Change in working capital 679 92Cash flows from (used in) operating activities during the period 3,995 3,359- Investments in tangible and intangible assets (net of vehicles sold under buy-back commitments) (2,854) (2,636)Cash flows from (used in) operating activities during the period, net of capital expenditures 1,141 723- Net change in receivables from financing activities 149 409- Change in scope of consolidation and other changes 106 2,285Net cash flows from (used in) industrial activities excluding capital contributions and dividends paid 1,396 3,417- Capital increases, dividends, and purchase/disposal of treasury stock (1) 2,971- Translation exchange differences 51 (160)Change in net industrial debt 1,446 6,228Net industrial debt at end of period (1,773) (3,219)


During 2006 net industrial debt decreased by 1,446 millioneuros, mainly due to the positive operating performance. Cashflow generated by operating activities during the period waspositive by 3,995 million euros (679 million euros of whichattributable to the decrease in working capital), and more thanoffset industrial capital expenditures of 2,854 million euros.

Furthermore, the collection of financial receivables fromassociated companies and sold companies (Atlanet S.p.A.)and of financial receivables from others generated 149 millioneuros in positive cash flow.

During the fiscal year, the outlay connected with therepurchase of 29% of Ferrari (total of 919 million euros) wasmore than compensated by the proceeds (included in the itemChange in scope of consolidation and other changes), mainlyderiving from the transaction with Crédit Agricole(approximately 360 million euros) the sale of B.U.C. – BancaUnione di Credito (254 million euros), of Machen Iveco HoldingSA (which held a 51% shareholding in Ashok Leyland Ltd) for88 million euros, of Atlanet S.p.A., Sestrieres S.p.A.,Immobiliare Novoli S.p.A., IPI S.p.A. (total of 120 million euros)and other minor companies.

and operating autonomy, to realise economies of scale byavailing themselves of professional and specialised serviceswith improving levels of quality and to concentrate theirresources on the management of their core business.

Board of DirectorsAs envisaged in the By-laws, the number of members ofthe Board of Directors ranges from nine to fifteen. TheStockholders Meeting held on May 3, 2006 set the numberof members of the Board of Directors at fifteen and they shallremain in office until the date of the Stockholders Meetingthat will be called to approve the 2008 financial statements.

As envisaged in Article 16 of the Company’s By-laws, therepresentation of the Company is vested, severally, in allexecutive directors, and as envisaged in Article 12, the ViceChairman, if appointed, shall act as Chairman if the latter isabsent or prevented from acting. As in the past, the Boardof Directors adopted a model for delegation of broad operatingpowers to the Chairman and the Chief Executive Officer,authorising them to severally perform all ordinary andextraordinary acts that are consistent with the Company’spurpose and not reserved by law or otherwise delegatedor reserved to the Board of Directors itself. In practice, theChairman exercises coordination and strategic guidance withinthe activities of the Board of Directors, while the ChiefExecutive Officer is in charge of the operating managementof the Group.

The Board defined the “Guidelines for Significant Transactionsand Transactions with Related Parties”, by which it reservedthe right to examine and approve in advance any transactionof significance in the balance sheet, economic and financialfigures, including the most significant transactions with relatedparties, and subject all transactions with related parties tospecial criteria of substantial and procedural fairness.Therefore, decisions regarding significant transactions areexcluded from the mandate granted to executive directors.The term “significant transactions” refers to those transactionsthat in and of themselves require the company to inform themarket thereof, in accordance with rules established by marketsupervisory authorities.When the Company needs to execute significant transactions,the executive directors shall provide the Board of Directorsreasonably in advance with a summary analysis of the

Report on Operations Corporate Governance 49

IntroductionThe Fiat Group adopted and abides by the new CorporateGovernance Code of Italian Listed Companies, issued in March2006, supplemented and amended as necessary to ensure thatthe corporate governance system it adopted is in line with therules imposed for listing on the NYSE, including the relevantsections of the Sarbanes-Oxley Act, and the characteristicsof the Group.

In accordance with the regulatory requirements of BorsaItaliana, the “Annual Report on Corporate Governance”is prepared and made available on the occasion of the annualstockholders meeting that approves the financial statements.It is also available in the section “Investor Relations” on thewebsite www.fiatgroup.com, which also contains documentsregarding the Fiat Group corporate governance system.In compliance with the guidelines issued by Assonime andEmittenti Titoli S.p.A., this Report is composed of four sections:the first containing a general description of the structureof corporate governance, the second analysing in detail theimplementation of the provisions of the Corporate GovernanceCode, the third highlighting certain of the more significantaspects of the applicable United States law, and the fourthcontaining summary tables and the corporate governancedocuments of the Fiat Group. Highlights relevant to thisReport on Operations are illustrated below.

Direction and Coordination ActivitiesFiat S.p.A. is not subject to direction and coordination activitiesby companies or entities. The Italian companies that Fiat S.p.A.directly and indirectly controls, with the exception of particularcases, have identified Fiat S.p.A. itself as the entity thatperforms direction and coordination activities, pursuant toArticle 2497 bis of the Italian Civil Code. This activity consistsin indicating the general strategic and operating guidelines ofthe Group and takes concrete form in the definition andupdating of the corporate governance and internal controlmodel, issuance of a Code of Conduct adopted by the Group,and elaboration of the general policies for the managementof human and financial resources, purchasing of factors ofproduction, and communication. Furthermore, coordinationof the Group envisages centralised management, throughdedicated companies, of cash management, corporate andadministrative, internal audit, and training services. This allows the subsidiaries, which retain full management

Industrial ActivitiesIn 2006, Industrial Activities generated cash and cashequivalents totalling 1,194 million euros, and in particular:

n operating activities generated 3,995 million euros: incomecash flow (net income plus amortisation and depreciation),net of Gains/losses and other non-cash items and includingchanges in provisions, deferred taxes and items relating tothe management of sales with buy-back commitments, waspositive by 3,136 million euros, to which dividends for 180million euros and the positive effect (679 million euros) ofthe reduction in working capital should be added;

n investment activities absorbed a total of 442 million euros. Theliquidity generated:

– by the sale of non-current assets for 1,574 million euros(principally the sale of 50% of FAFS to Crédit Agricole, thesale of B.U.C. – Banca Unione di Credito, Atlanet S.p.A.,Sestrieres S.p.A., and the interests held in ImmobiliareNovoli S.p.A., Machen Iveco Holding SA, and IPI S.p.A.);

– by reimbursement of financing disbursed by the centralisedcash management entity to the financial services companiesof Fiat Auto sold as part of the transaction with CréditAgricole for over 3 billion euros, including the Other changes(net of greater net financial receivables from Group FinancialServices companies), in addition to collection of financialreceivables for 149 million euros (principally from associatedcompanies and sold companies), and the reduction insecurities held as current assets (65 million euros),

only partially offset requirements for investments during theperiod, including those in investments, which include buy-backof 29% of Ferrari and the disbursal for repurchase of 51% ofFidis Retail Italia as part of the transaction with Crédit Agricole;

n financing activities absorbed 2,257 million euros in liquidity.The funding requirements generated by the redemption ofbonds and the repayment of bank loans, in addition to lowerasset-backed financing, were only partly offset by the bondsissued.


Corporate Governance Financial ServicesThe cash and cash equivalents of Financial Services atDecember 31, 2006 totalled 1,030 million euros, 130 millioneuros higher than at December 31, 2005.

The cash generated mainly derived from:

n operations during the year, which generated 734 millioneuros in cash, principally in consequence of income cash flow(net income plus amortisation and depreciation);

n investment activities, which absorbed 968 million euros inliquidity. In 2006, the liquidity generated by a reduction incurrent securities and the financing received from industrialcompanies in support of activity almost entirely offset growthin the investment portfolio. The liquidity absorbed during theperiod is therefore mainly attributable to investments for theperiod (mainly in vehicles that had been leased out underoperating leases), which amounted to 935 million euros;

n financing activities, which generated 435 million euros incash, mainly due to higher asset-backed financing connectedwith portfolio growth.

n Sergio Marchionne: Chairman of SGS S.A., Member ofthe Supervisory Board of Hochtief AG

n Virgilio Marrone: Chief Executive Officer and GeneralManager of IFI S.p.A., Director of Exor Group and memberof the Management Board of Intesa Sanpaolo

n Vittorio Mincato: Chairman of Poste Italiane S.p.A., Directorof Parmalat S.p.A.

n Pasquale Pistorio: Honorary Chairman of S.T. Microelectronics,Director of Chartered Semiconductor Manufacturing, TelecomItalia S.p.A. and Energy Conversion Device Inc.

n Carlo Barel di Sant’Albano: Chief Executive Officerand General Manager of IFIL Investments S.p.A., Directorof Juventus FC S.p.A. and Sequana Capital

n Ratan Tata: Chairman of Tata Sons Ltd, Tata Industries Ltd,Tata Steel Ltd, Tata Motors Ltd, Tata Chemicals Ltd, The IndianHotels Company Ltd, The Tata Power Company Ltd, Tata TeaLtd, Tata Autocomp Systems Ltd, Tata Consultancy ServicesLtd, Tata Teleservices Ltd, Tata Teleservices (Maharashtra) Ltd,Tata Technologies (Pte) Ltd (Singapore), Tata International AG,Tata Limited (UK), Tata Incorporated (USA), Tata AmericaInternational Corporation Ltd and Tata Motors EuropeanTechnical Centre, Plc.

n Mario Zibetti: Director of Ersel Sim S.p.A.

Committees established by the Boardof DirectorsThe Board of Directors established the Internal ControlCommittee and the Nominating and Compensation Committee.The Board also entrusted the Nominating and CompensationCommittee with the task of selecting and proposing nomineesfor the post of Director and it also established the StrategicCommittee, on which it relies for the preparation of Companyand Group strategies.

strategic consistency, economic feasibility, and expected returnfor the Company.Decisions regarding the most significant transactions withrelated parties are also excluded from the mandate grantedto executive directors, with all transactions being subjectto special rules of substantial and procedural fairness anddisclosure to the Board.

At December 31 2006, the Board is comprised by threeexecutive directors and twelve non-executive directors – thatis, who do not hold delegated authority or perform executivefunctions in the Company or the Group –, eight of whom areindependent.

The executive directors are the Chairman, the Vice Chairman,who substitutes for the Chairman if the latter is absentor prevented from acting, and the Chief Executive Officer. Theyalso hold management positions in subsidiaries: Luca Corderodi Montezemolo is Chairman of Ferrari S.p.A., John Elkann isChairman of Itedi S.p.A., and Sergio Marchionne, in additionto being Chairman of the principal subsidiaries, is also ChiefExecutive Officer of Fiat Group Automobiles S.p.A.

An adequate number of independent directors is essentialto protect the interests of stockholders, particularly minoritystockholders, and third parties. In order to achieve thisobjective, the Board of Directors resolved to submit a motionto the Stockholders Meeting to confirm the principle of a boardwith a majority of independent directors as well as theselective criteria for determining independence, alreadyadopted in 2005. The Board of Directors held that enhancingprotections against potential conflicts of interest is a priorityfor the Company, particularly in those areas less prone tocontrol by the Stockholders Meeting. During 2006, followingthe resolutions passed by the Stockholders Meeting on June23, 2005 and on May 3, 2006, the Board of Directors was madeup of a majority of independent directors.

The qualifications of independent directors are assessedannually and based on the absence or insignificance duringthe previous three years of investment, economic, or otherrelationships maintained directly, indirectly, or on behalf of thirdparties with the Company, its executive directors and managerswith strategic responsibilities, its controlling companies orsubsidiaries, or with parties otherwise related to the Company.

Internal Control SystemAmending what was defined in 1999, partly in order to receivethe changes made to the Corporate Governance Code, the Boardadopted the “Guidelines for the Internal Control System,” whichcame into effect on January 1, 2003.Essential parts of the Internal Control System are the Codeof Conduct that replaced the Code of Ethics in 2002, and theCompliance Program adopted by the Board of Directors pursuantto the “Norms governing the Administrative Liability of LegalEntities” envisaged in Legislative Decree no. 231/2001, asamended.The Code of Conduct expresses the professional principlesof corporate conduct that Fiat has adopted and with whichdirectors, statutory auditors, employees, consultants,and partners are requested to conform.

In a resolution dated July 24, 2006, the Fiat Board of Directorsapproved the third edition of the Compliance Program pursuantto Legislative Decree 231/01 and the new “Guidelines” foradoption of the Program by Fiat Group Companies. The changesmade to the previous edition consisted of the introduction ofrecent changes in the law and case law, receiving the new modelfact situations of offences regarding protection of investors andmarket abuse, and identifying the associated sensitive processes. At the same time, a collegial Compliance Program SupervisoryBody was appointed, consistently with current statutes and caselaw, as well as the orientation of the most important economicenterprises in Italy. The Compliance Program Supervisory Bodyreports on its own activities to the Board of Directors through theInternal Control Committee and the Board of Statutory Auditors.The Compliance Program Supervisory Body – comprised of theGroup Compliance Officer, the Senior Counsel, and an externalprofessional – approved its own Internal Regulation anda specific Supervisory Program.

In application of the Compliance Program, the Code of Conduct,and provisions of the Sarbanes-Oxley Act on whistleblowings,the Procedure for Whistleblowings Management was adopted inorder to regulate the management of reports and claims filed byindividuals inside and outside the Company regarding suspected

Report on Operations Corporate Governance 51Report on Operations Corporate Governance50

At its meeting held on May 3, 2006, the Board of Directorsconfirmed that the directors Roland Berger, Luca Garavoglia,Gian Maria Gros-Pietro, Hermann-Josef Lamberti, VittorioMincato, Pasquale Pistorio, Ratan Tata and Mario Zibettisatisfied these requirements of independence.

Some of the current directors also hold positions at other listedcompanies or companies of a significant interest. Excludingthe previously mentioned positions held by executive directorsat the Fiat Group, the most significant are as follows:

n Andrea Agnelli: Director of IFI S.p.A.

n Roland Berger: Member of the Supervisory Board of AlcanInc., Schuler AG, LP Holding GmbH, Loyalty Partners Holdingsand Helios Kliniken GmbH

n Tiberto Brandolini D’Adda: Vice Chairman of IFIL InvestmentsS.p.A., Vice Chairman and Chief Executive Officer of ExorGroup, Chairman and General Manager of Sequana Capital,General Partner of Giovanni Agnelli e C. S.a.p.A., Director of IFIS.p.A., Espírito Santo Financial Group, SGS S.A. and VittoriaAssicurazioni S.p.A.

n Luca Cordero di Montezemolo: Director of Poltrona FrauS.p.A., Tod’s S.p.A., Indesit Company S.p.A., Pinault PrintempsRedoute and Le Monde, Member of the International AdvisoryBoard of Citigroup Inc.

n John Elkann: Vice Chairman and General Partner ofGiovanni Agnelli e C. S.a.p.A., Vice Chairman of IFILInvestments S.p.A., Director of IFI S.p.A., Exor Group,RCS MediaGroup and Banca Leonardo

n Luca Garavoglia: Chairman of Davide Campari Milano S.p.A.

n Gian Maria Gros-Pietro: Chairman of Autostrade S.p.A.,Autostrade per l’Italia S.p.A. and Perseo S.p.A., Directorof Edison S.p.A. and Seat Pagine Gialle S.p.A.

n Hermann-Josef Lamberti: Member of the ManagementBoard of Deutsche Bank AG, Chairman of the SupervisoryBoard of Deutsche Bank Privat- und Geschäftskunden AG,Member of the Supervisory Board of Deutsche Börse AG andof Carl Zeiss AG

or presumed violations of the code of conduct, financial and/oraccounting fraud against the company, oppressive behaviourtowards employees or third parties, and complaints regardingbookkeeping, internal audits, and independent audits.

The Procedure for the Engagement of Auditing Firms regulatesthe engagement of Group external auditors by Fiat S.p.A. and itssubsidiaries, as well as the commissioning of the companies andprofessional firms that maintain an ongoing relationship withthose external auditors (so-called network) in order to ensure themandatory independence of the auditing firm.

Documents and financial information regarding the Company,including those posted on the Group website, are disclosedin compliance with the “Disclosure Controls & Procedures”adopted in conformity with the Securities Exchange Act of1934 and the Sarbanes Oxley Act of 2002.

Board of Statutory AuditorsThe Board of Statutory Auditors is comprised of threeStatutory Auditors and three Alternates, all of whom,as required by Article 17 of the By-laws, must be entered inthe Auditors’ Register and have at least three years’ experienceas chartered accountants. Furthermore, they may not holdthe position of statutory auditor in more than five other listedcompanies, with the exception of the controlling companiesand subsidiaries of Fiat S.p.A.

Pursuant to the resolutions approved by the StockholdersMeeting held May 3, 2006, the following individuals belong to theBoard of Statutory Auditors, which also performs the role of theaudit committee as envisaged by US-law, but within the limitsimposed by Italian law: Carlo Pasteris, Chairman, and GiuseppeCamosci and Cesare Ferrero, Statutory Auditors. Their termexpires on the date of the stockholders meeting that approvesthe 2008 financial statements. Carlo Pasteris holds the position ofChairman of the Board of Statutory Auditors of ToroAssicurazioni S.p.A. Cesare Ferrero, in addition to the positionsheld as Chairman of the Board of Statutory Auditors of IFILInvestments S.p.A. and Giovanni Agnelli & C. S.a.p.A., also holdsthe position of statutory auditor at Toro Assicurazioni S.p.A. andof director at Autostrada Torino Milano S.p.A. and DavideCampari Milano S.p.A. Giuseppe Camosci does not hold otherpositions in listed companies.

Thus far, the Board has approved Stock Option Plans offered toabout 900 managers of the Group’s Italian and foreign companieswho are qualified as “Direttore” or have been included in theManagement Development Program for high-potential managers.Plan regulations share these common features:

n Options are granted to individual managers on the basisof objective parameters that take into account the levelof responsibility assigned to each person and his or herperformance;

n If employment is terminated or an employee’s relationshipwith the Group is otherwise severed, options that are notexercisable become null and void. However, vested optionsmay be exercised within 30 days from the date of termination,with certain exceptions;

n The options exercise price, which is determined on the basisof the average stock market price for the month preceding theoption grant, can vary as a result of transactions affecting theCompany’s capital stock. It must be paid in cash uponthe purchase of the underlying shares;

n Consistently with tax regulations on the issue, the optionsare normally exercisable starting three years after they aregranted and for the following six years. Nevertheless,the totality of the options granted becomes exercisable onlyfour years after the grant date.

In consideration of the options that have been exercised andof those that have expired upon termination of employment,a total of 5,433,900 option rights corresponding to the samenumber of shares represent treasury stock to be assigned tothe holders of options pursuant to the conditions envisagedin the specific Regulations.

Report on Operations Stock Options Plans 5352

In accordance with Article 17 of the Company’s By-lawsand as envisaged under the Consolidated Law on FinancialIntermediation, properly organised minority groups mayappoint one Statutory Auditor. The minimum equity interestneeded to submit a slate of candidates is equal to 1% of theordinary capital. Furthermore, in accordance with the By-laws,the slates of candidates must be deposited at the registeredoffice of the company at least ten days before the scheduleddate of the Stockholders Meeting on its first call and beaccompanied by statements certifying satisfaction of therequirements prescribed by law and the By-laws and that theyare not ineligible or incompatible, on penalty of rejection ofthose slates. Slates representing minority stockholders werepresented for the first time ever at the May 3, 2006Stockholders Meeting. This led to the appointmentof Professor Pasteris, who became the Chairman of the Boardof Statutory Auditors in accordance with the law.

Stock Option PlansIn 2004 the Board of Directors granted Mr. Sergio Marchionne,as a portion of his variable compensation as Chief ExecutiveOfficer, options for the purchase of 10,670,000 Fiat ordinaryshares at the price of 6.583 euros per share, exercisable fromJune 1, 2008 to January 1, 2011. In each of the first three yearssince the grant, he accrues the right to purchase, from June 1,2008, a maximum of 2,370,000 per year and on June 1, 2008he accrues the right to purchase, effective that date, theresidual portion amounting 3,560,000 shares. The right toexercise the options related to this last portion of sharesis subject to certain predetermined profitability targets thatshould be reached during the reference period.

Ferrari S.p.A. had granted its Chairman, Luca Cordero diMontezemolo, options for the purchase of 184,000 Ferrarishares, 80,000 of which exercisable upon placement of Ferrarishares on the stock market, at a price of 175 euros per shareand exercisable until December 31, 2010. At the beginning of2006, Mr. Montezemolo exercised the 104,000 options whoseexercise was not subject to the abovementioned conditionthrough the subscription of an equal number of newly-issuedFerrari S.p.A. shares. Fiat S.p.A. purchased from LucaCordero di Montezemolo a total of 93,600 Ferrari shares at aunit price of 285 euros per share (for a total investment of 26.6million euros), equal to the price agreed upon by MediobancaS.p.A. and Mubadala Development Company PJSC on theoccasion of the sale of 5% of the capital stock of Ferrari S.p.A.in August 2005.

Options granted as part of Stock Option Plans on Fiat sharesand outstanding at December 31, 2006 are shown below.Options granted to Board Members are instead shown in aspecific table in the Notes to the Financial Statements.

Report on Operations Corporate Governance

2006 2005

Number of Average Market Number of Average Marketshares exercise price (*) price shares exercise price (*) price

Options outstanding on 1/1 7,749,500 17.51 7.37 10,502,543 16.38 5.9Options granted during the year – – – – – –Options exercised during the year 558,250 10.4 13.74 – – –Expired options 1,757,350 – – 2,753,043 – –Options outstanding on 12/31 5,433,900 16.93 14.42 7,749,500 17.51 7.37Options exercisable on 12/31 5,433,900 16.93 14.42 6,987,875 18.28 7.37

(*) Following the capital increases in January 2002 and July 2003 the exercise prices were adjusted by applying the factors calculated by Borsa Italiana, in the amount of 0.98543607 and0.93167321. The capital increase of September 2005, factor equal to 1, did not give rise to adjustments.

holdings in the capital of Fiat Auto S.p.A. (now Fiat GroupAutomobiles S.p.A.) and Fiat Powertrain Italia S.r.l. (now FiatPowertrain Technologies S.p.A.). Fiat Netherlands Holding N.V.similarly transferred its 100% holding in Iveco S.p.A. on a pro-rata basis to its stockholders Fiat S.p.A. and Fiat PartecipazioniS.p.A. Finally, Fiat S.p.A. contributed its investments inMagneti Marelli Holding S.p.A. (99.99%) and Teksid S.p.A.(84.79%) to Fiat Partecipazioni S.p.A. in February 2007.

Report on Operations Transactions among Group Companies and with Related Parties 55Report on Operations Stock Options Plans54

Transactions among Group companies, whether they are madeto support vertical manufacturing integration or to provideservices, are carried out at market conditions that are normalin the respective markets, taking into account thecharacteristics of the goods sold and the services provided.

The main transactions that took place during 2006 betweenthe Parent Company, Fiat S.p.A., and its subsidiaries andassociated companies are provided in Note 30 of the Notesto the Financial Statements of Fiat S.p.A.

Relationships with related parties, whose definition wasextended in accordance with IAS 24, include not only normalbusiness relationships with listed groups or other majorgroups in which the directors of the Company or its parentcompanies hold a significant position, but also purchasesof Group products at normal market prices or, in the caseof individuals, the prices that are usually chargedto employees.

Information on transactions with related parties, as requiredby Consob communication of July 28, 2006, are presentedrespectively in Note 35 of the Notes to the ConsolidatedFinancial Statements and Note 30 of the Notes to the FinancialStatements of Fiat S.p.A.

Based on the information received from the various Groupcompanies, there were no atypical or unusual transactions– as such transactions are defined by Consob – during the year.

Extraordinary transactions among Group companies thatoccurred during the year included:

n the “Series A” preference shares of CNH Global N.V. heldby Fiat Netherlands Holding N.V. were automatically convertedinto ordinary shares when the underlying conditions were met.In this connection, reference should be made to the section onthe Scope of consolidation in the Notes to the ConsolidatedFinancial Statements;

n the corporate structure of the subholding companies wasrationalised. This has led to placing Fiat Partecipazioni S.p.A.at the head of certain industrial Sectors and, as a result, tosimplifying the chain of foreign subholding companies. FiatAuto Holding B.V. was unwound in 2006 as part of this processafter transferring to Fiat Partecipazioni S.p.A. its entire

The Board of Directors, at its meeting of November 3 2006,approved an incentive plan that will be submitted, pursuant to Article 114 bis of the Consolidated Law on FinancialIntermediation, to the Stockholders’ Meeting that will be calledto approve the 2006 Financial Statements. The plan will have aduration of eight years and envisages the granting of optionsfor the purchase of 20 million Fiat ordinary shares at a strikeprice of 13.37 euros, equal to the arithmetical average of theofficial prices posted on the Borsa Italiana S.p.A.’s market inthe thirty days preceding the Board resolution. Grantees of theplan are the Chief Executive Officer of Fiat S.p.A. SergioMarchionne, for 10 million options corresponding to an equalnumber of outstanding ordinary shares, and for an additional10 million options, corresponding to an equal number ofnewly-issued shares, more than 300 executives who have asignificant impact on business results. The options granted to employees and 50% of the options granted to SergioMarchionne have a four-year vesting period, in equal annualquotas, predicated on the achievement of predetermined

financial targets in the reference period and are exercisablestarting from the approval of the 2010 Financial Statements.The residual 50% of the options granted to the Chief ExecutiveOfficer of Fiat S.p.A., which also has a four-year vesting periodin equal annual quotas, is exercisable starting November 2010.

The Board therefore exercised the powers granted to itpursuant to Article 2443 of the Italian Civil Code for the capitalincrease to service the incentive plan. The capital increase isreserved to employees of the Company and/or its subsidiaries,within a limit of 1% of the capital stock, i.e. for a maximum of50,000,000 (fifty million) euros through the issue of amaximum of 10,000,000 (ten million) ordinary shares with apar value of 5 (five) euros each, corresponding to 0.78% of thecapital stock and 0.92% of the ordinary capital, at theabovementioned price of 13.37 euros. Execution of this capitalincrease is subject to the approval by the Stockholders Meetingof the incentive plan and is dependant on the conditions of theplan being satisfied.

Transactions among Group Companiesand with Related Parties

Interests held by Members of the Board of Directors and Control Bodies, General Managersand Executives with strategic responsibilities (Art. 79 of Consob Regulation, Resolution No. 11971 of May 14, 1999)(number of shares)

Change in the Number of Number of Number of number of shares Number of

Description shares held shares bought shares sold for incoming/ shares heldFirst name and last name of investment at 12.31.2005 in 2006 in 2006 (outgoing) Executives at 12.31.2006

Luca Cordero di Montezemolo Fiat ordinary 19,172 108,000 – 127,172Sergio Marchionne Fiat ordinary 220,000 20,000 – 240,000Gian Maria Gros-Pietro Fiat ordinary – 3,300 – 3,300Cesare Ferrero Fiat ordinary 1 – – 1

Executives with strategic responsibilities Fiat ordinary 81,884 45,950 46,707 -11,615 69,512Fiat preference 1,144 – – -1,144 –Fiat savings 2,188 – 728 -842 618CNH ordinary 2,000 2,212 – – 4,212

Finally, the name “Fiat Group Automobiles S.p.A.” highlightsthe international vocation of this large industrial organisation. The creation of four companies reflects the attention devotedby the Group to positioning the brands on the market. The Fiat, Alfa Romeo, Lancia, and Fiat Light CommercialVehicles brands each have a specific identity with defined,recognised characteristics, and apply distinct commercialand market policies.Formation of these four new companies must be interpretedin view of the growing distinctiveness of the brands, enhancedvalue, and reinforcement of their competitive capacities.

n On February 14 2007, Fiat and Tata Motors signedan agreement which calls for a Tata license to build a pick-upvehicle bearing the Fiat nameplate at Fiat Group Automobiles’plant in Córdoba, Argentina. The first vehicles will roll off theCórdoba assembly lines during 2008. Annual production isslated at around 20,000 units. Total planned investment in theproject is around US$80million. With the production of thepick-up model, the Fiat complex in Córdoba will retake theintegral activity of all its productive units, to a great extentreinitiated with the manufacture of Fiat engines and gearboxesand the recent agreement to produce gearboxes for PSAPeugeot Citröen. The pick-up, based on the new generationTata pick-up truck, will be sold in South and Central Americaand selected European markets through Fiat Automobiles’distribution and importer network. This will permit the Fiatbrand to aggressively enter the medium pick-up sector, thanksto Tata Motors’ specific know-how.

n On February 14 2007, Iveco and Tata Motors announced thesigning of a Memorandum of Understanding (MoU) to analysethe feasibility of cooperation, across markets, in the area ofCommercial Vehicles. The MoU encompasses a number ofpotential developments in engineering, manufacturing,sourcing and distribution of products, aggregates andcomponents. Shortly after the MoU signature, Iveco and TataMotors will set up a joint Steering Committee to determine thefeasibility of cooperation, both in the short and over the longterm. When found feasible, the two companies will enter intodefinitive agreements in the course of the coming months.

n A meeting was held on February 19, 2007 at the Italian PrimeMinister’s Office, with the participation of the Prime Minister,the Ministers of Labour and Transport, and the Vice Minister

Significant Events Occurring since the Endof the Fiscal YearThe most significant transactions completed by the Fiat Groupduring early 2007 are set out below:

n On January 26, Fitch Ratings announced that it upgradedFiat’s rating to “BB” from “BB-“, reaffirming the short-termrating to “B” and maintaining the outlook “positive”. Standard& Poor’s Ratings Services revised its outlook on Fiat rating to“positive” from “stable”, affirming the ‘BB’ long-term and ‘B’short-term corporate credit ratings. On February 12, Moody’sInvestors Service upgraded to Ba2 from Ba3 Fiat ratingmaintaining the positive outlook. The short term rating remainsunchanged.

n On February 1, 2007 Fiat Auto changed name to “Fiat GroupAutomobiles S.p.A.”. Four new companies were formed at the same time, 100%owned by Fiat Group Automobiles S.p.A.: “Fiat AutomobilesS.p.A.”, “Alfa Romeo Automobiles S.p.A.”, “LanciaAutomobiles S.p.A.”, and “Fiat Light Commercial VehiclesS.p.A.”.These changes are consistent with the new corporate cultureat the Fiat Group. In particular, they reflect two strategicdecisions as to how to approach the business. On the onehand, the Group will exist as a unified whole, and on the otherhand, each company will be characterised by the specificnature of the respective operating sectors and individualbrands. Over the next few months, all Group activities will highlightthis aspect by pairing the “Fiat Group” mark with the sectoror brand trademark.Inclusion of the word “Group” in the name reflects itsprominent role as a constituent part of the Fiat Group,considering the contribution that Fiat Auto makes to Groupresults and the realisation of major synergies with otherGroup sectors. The new name also identifies a key area of activity that hasrecently undergone profound transformation, featuringa newly streamlined structure that is more solid and compactthan before.At the same time, it also indicates the synergies linkingthe automotive business, which has already generated majorbenefits in terms of operating efficiency, resourcemanagement, and cost cuts.

The agricultural tractor industry is expected to continuerunning at high levels, while the combine industry shouldrecover from the recent declines on the back of pricingrecovery in corn and soybeans. The worldwide construction-equipment industry should remain strong for both heavy andlight equipment, although the North American markets areexpected to soften for a year before resuming upward growthin 2008. In this context, CNH expects to improve sales volumesthanks to new products, improved pricing and market sharegains. Higher volumes, manufacturing efficiencies and othercost reductions will be partially offset by continuing higherR&D investments.

In Western Europe, the market for light, medium and heavycommercial vehicles is expected to remain substantially stable.In this environment, Iveco aims at increasing both profitabilityand market share by a substantial commercial repositioning,with price improvements coming from the introduction of newEuro 4 and Euro 5 compliant vehicles. For heavy trucks, Ivecowill be leveraging the performances of the New Stralis,especially in terms of fuel efficiency and the improvementin the resale value of our vehicles.

In order to achieve set targets, the Fiat Group will continueto push inter-Sector purchasing synergies, increasing andaccelerating development of best-cost-country spending,strengthening strategic partnerships with suppliers throughlong-term contracts, and focusing on the implementationof the world-class manufacturing initiative.

As a result, the Group confirms its targets for 2007: tradingprofit between 2.5 billion euros and 2.7 billion euros (4.5%to 5.1% trading margin) and net income between 1.6 billioneuros and 1.8 billion euros.

By sector, full-year 2007 trading margin targets (trading profitas a percentage of revenues) will range as follows:

n Autos, 2.6% to 3.4%;n CNH, 8.9% to 9.7%;n Iveco, 7.1% to 7.9%.

While working on the achievement of these objectives, theFiat Group will continue to implement its strategy of targetedalliances, in order to reduce capital commitments, and reducethe related risks.

Report on Operations Significant Events Occurring since the End of the Fiscal Year and Business Outlook 57

for Economic Development, as well as national labourfederation and industry representatives. The Chief ExecutiveOfficer Sergio Marchionne illustrated the Group’s developmentplans for 2007-2010, with special attention being devoted tothe situation in Italy. The meeting concluded with the signingof a transcript in which the Italian Government affirmed itswillingness to support the Company’s development plans.In particular, this would involve close assessment of initiativestaken in support of investments and research, and recognisethe existence of conditions for granting the Fiat Group a quotafor “mobilità lunga” (long-term mobility benefit to bridgethe period prior to retirement). This amount was definedin the December 18, 2006 labour agreement, which envisagesthat a maximum of 2,000 Group employees will be laid off.The meeting transcript also envisages setting up a roundtablewith the participation of local institutions to examine themeasures necessary to overcome logistical and economicrestraints at the Termini Imerese plant in Sicily, so thatproduction of a model can be allocated to it starting from 2009.

Furthermore, the obligations imposed by the “Personal DataProtection Code” (Legislative Decree No. 196/2003) weresatisfied in compliance with the provisions of the “TechnicalRegulation of Minimum Security Measures” (Appendix Bof the Code). Consequently, the Fiat S.p.A. Security PlanningDocument was updated by the addition of the Plan foradditional measures reinforcing security levels in orderto combat the evolution of emerging risk factors.

Business OutlookThe Western European automobile market is expectedto remain stable in 2007, while demand in Brazil shouldshow moderate growth.

In this context, the Group’s Automobile Sector plansto leverage the introduction of its new models (mainlyFiat Bravo, Fiat Linea and Fiat 500) to continue to boostvolume and improve mix in the European markets. Meanwhile,the Sector’s Brazilian operations are expected to delivera trading performance in line with 2006. The Company willcontinue to implement its strategy of aggressive cost-cuttingin all non-essential areas and, while streamlining governancecosts, it will continue to invest in marketing and advertising,in order to support its growth ambitions.

Report on Operations Significant Events Occurring since the End of the Fiscal Year and Business Outlook56

Significant Events Occurringsince the End of the Fiscal Year and Business Outlook

There can be no motion without some particular direction. Jean-Jacques Rousseau

Report on OperationsOperating Performance by Sector of Activity

62 Fiat Auto – Fiat, Alfa Romeo, Lancia and Fiat Light Commercial Vehicles

66 Maserati

67 Ferrari

68 Agricultural and Construction Equipment

70 Trucks and Commercial Vehicles

74 Fiat Powertrain Technologies

76 Components

78 Metallurgical Products

79 Production Systems

80 Services

81 Publishing and Communications

02_Settori UK 06.qxd 23-03-2007 17:16 Pagina 58

Report on Operations 61Relazione sulla gestione Fiat Auto60

Agricultural Trucks andand Construction Commercial Components and Other Businesses

Automobiles Equipment Vehicles Production Systems Services

Operating Performance by Sector of Activity

Publishing andCommunications


Report on Operations Fiat Auto62

Operating PerformanceIn 2006, the Western European automobile market expandedslightly (+0.7%) from 2005.

Demand rose 3.7% in Italy and 3.8% in Germany, while itcontracted in the other principal countries: France by -3.3%,Great Britain by -3.9%, and Spain by -2%.

Outside Western Europe, demand expanded slightly inPoland (+1.5%). In contrast, the Brazilian market expandedsignificantly, at a rate of 13.1%.

The commercial vehicle market performed well in WesternEurope (+5.6%) as compared with the previous year. Demandrose by about 8% in Italy, over 10% in Germany, 4.8% in France,and 5.9% in Spain, while remaining stable in Great Britain.

In 2006, the Sector performed very well in terms of marketshare. In Italy, its share of the automobile market rose to30.7%, or 2.7 percentage points higher than in 2005. InWestern Europe, its share reached 7.6%, up 1.1 percentagepoints from 2005. Fiat Auto’s share of the commercial vehicle market in Italywas 47.1%, with an improvement of 4.7 percentage points. InWestern Europe, its share rose by 0.7 percentage points to 11%.In Brazil, the Sector’s share of the automobile and commercialvehicle markets in 2006 reached 25.3% (for an increase of 0.9percentage points) and 26.1% (-2.7 percentage points),respectively.In 2006, Fiat Auto delivered a total of 1,980,300 units, for anincrease of 16.7% from 2005. In Western Europe, 1,289,600units were delivered, for an increase of 17.2%.

The positive sales performance during the year stemmed fromthe growing success of new models that had been introducedpreviously, first and foremost the Grande Punto and Panda, aswell as the other models that were introduced during the yearto enrich the product line of the three brands.

Deliveries increased sharply in almost all of the principalEuropean countries, with growth rates far outpacing themarket, as in Italy (+17.5% from 2005 deliveries) and Germany(+21.3%), or realised in contracting markets, such as GreatBritain, where deliveries rose by 42.8%, and France (+10.9%).Spain represented an exception, where a marginal slipin deliveries (-1.0%) reflected weak demand.

enter new segments and technologies, enhance its know-how,and access new markets.

The primary objective of these agreements was to reinforcethe Sector’s presence on two high-growth markets, Russiaand India.

The collaboration between Fiat Auto and the Russian car makerSeverstal Auto has evolved in a series of steps. At thebeginning of 2006, agreements were reached for the assemblyin Russia, starting in 2007, of Albea, Palio, and Doblò modelsbased on CKD produced by Tofas, as well as for the import anddistribution in Russia of Fiat cars and light commercial vehicles.In March 2006, a letter of intent was signed to further developof the strategic partnership between Fiat and Severstal in allindustrial areas of the Fiat Group. An agreement was signedin July for production and distribution of the Ducato in Russiaby Severstal. Production is planned to start in the last quarterof 2007.

Cooperation with India was also intense. After reaching anagreement in January 2006 for the sale of Fiat cars in Indiathrough joint use of the sales network, Fiat and Tata Motorssigned a memorandum of understanding in July for industrialcollaboration; within this context, in December they signed anagreement for the creation of a joint venture in India for theproduction of cars, engines and transmissions. Fiat Auto willintroduce the Grande Punto and Fiat Linea. On the basis of ajoint analysis undertaken in July 2006, Fiat and Tata Motorscontinued studies for industrial and commercial cooperationin Latin America: these studies resulted in an agreement,signed in February 2007, which calls for a Tata license to builda pick-up vehicle in the Fiat Group Automobiles plant inCordoba, Argentina.

These important partnership agreements are complementedby the license to produce diesel engines granted to Suzukiin March 2006, the May 2006 agreement with PSA PeugeotCitroën for production at the Fiat plant in Cordoba of atransmission for the French customer, and the signing inOctober of a memorandum of understanding with theChinese company Chery Automobiles for the supply ofgasoline engines to Fiat Auto.

Report on Operations Fiat Auto 63

In Poland, volumes contracted by 2.3% from 2005.

Outside the European Union, in 2006 Fiat Auto intensified itsactivities on those markets where its position is consolidated,such as Brazil, Argentina, and Turkey. At the same time, itpursued growth opportunities on other emerging marketstogether with strong local partners.

In Brazil, the Sector delivered 464,800 cars and lightcommercial vehicles. It increased its sales by 15% from 2005and confirmed its leadership position on the market. Thisexcellent result is mainly attributable to the success of flexversions (which run on both alcohol and gasoline) of the Palioand Mille models, as well as the Fiat Idea, voted Carro Do Año(Car of the Year) in Brazil.

Economic recovery continued in Argentina. The automobilemarket expanded by 16.2% from 2005, and Fiat Auto reported amarket share of 10.8%, down slightly from 2005 (-1.6 percentagepoints). Deliveries of automobiles and light commercialvehicles decreased by 0.7%, to a total of 43,800 units.

In Turkey, the automotive industry slowed down in 2006,together with the rest of the economy. The automobile andlight commercial vehicle market totalled approximately 621,000units, down 13.6% from 2005. Tofas (a local joint venture inwhich Fiat Auto has a 37.9% interest) reported a 9.1% decreasein deliveries. However, its aggregate market share was 11.8%,up 0.6 percentage points from the previous year. Thisimprovement was driven by the New Doblò, New Palio,and Albea.

In regard to light commercial vehicles only, a total of 323,500units were delivered in 2006, for an increase of 13.4% from2005. This was largely attributable to the New Ducato, whichenjoyed great success following its introduction at the end ofMay 2006, and the New Doblò. In Western Europe, deliveriestotalled 211,900 units (+16.5%). With the exception ofGermany, where deliveries fell by 1.9%, the other Europeancountries reported an increase in the number of unitsdelivered: France +40.1%, Italy +24.4%, Great Britain +10.7%,Spain +2.9%.

During 2006, the Sector continued its strategy of targetedalliances to reinforce its position on international markets,

Fiat Auto – Fiat, Alfa Romeo, Lancia and Fiat Light Commercial Vehicles

Highlights


Net revenues 23,702 19,533Trading profit 291 (281)Operating result (*) 727 (818)Investments in tangible and intangible assets 2,163 1,582- of which capitalised R&D costs 434 310Total R&D expenses (**) 675 665Automobiles and light commercial vehicles delivered (number) 1,980,300 1,697,300Employees at year-end (number) 44,691 46,099

(*) Including restructuring costs and unusual income (expenses).(**) Including R&D capitalised and charged to operations.

Automobile Market

(in thousands of units) 2006 2005 % change

- France 2,000.5 2,067.8 -3.3- Germany 3,468.0 3,342.1 3.8- Great Britain 2,344.9 2,439.7 -3.9- Italy 2,321.1 2,237.4 3.7- Spain 1,499.0 1,528.9 -2.0Western Europe 14,624.2 14,529.8 0.7Poland 239.0 235.5 1.5Brazil 1,599.9 1,414.8 13.1

Sales PerformanceAutomobiles and Light Commercial Vehicles


- France 88.0 79.3 10.9- Germany 110.1 90.8 21.3- Great Britain 76.1 53.3 42.8- Italy 808.2 687.7 17.5- Spain 69.6 70.3 -1.0- Rest of Western Europe 137.6 118.5 16.0Western Europe 1,289.6 1,099.9 17.2Poland 33.0 33.8 -2.3Brazil 464.8 404.3 15.0Rest of the World 192.9 159.3 21.2Total sales 1,980.3 1,697.3 16.7Associated companies 89.9 107.3 -16.2Grand total 2,070.2 1,804.6 14.7


Innovation and ProductsAfter the introduction of numerous new models in 2005,signalling implementation of the strategy to moderniseand improve Fiat Auto’s products, 2006 was marked bythe introduction of new models that rounded out the linesof models offered by Fiat, Lancia, and Alfa Romeo.

At Fiat, the number of Panda models (this is the top-sellingsegment A model in Europe) continued growing. The PandaHydrogen was presented in February, as the prototype of analternative fuel vehicle. In October, the model year and thetypically sporty 100 HP version were presented.

In March 2006, the diesel version of the Sedici was presentedand in December this version propelled the SUV to the top ofthe rankings for the best-selling 4x4 in Italy.

A preview presentation of the Fiat Linea was held in October.This model made its first official appearance at the IstanbulMotor Show in November. Produced by Tofas, it will go onsale in the first half of 2007. This car will enable the Fiat brandto establish a presence in the high-range C segment for sedansin Turkey and in the other countries where it will be sold.

After the preview at the end of October, the Bravo waslaunched in Rome on January 31, 2007. This is the new modelwith which the Fiat brand intends to regain top positions in themedium-size segment, which is the most important in Europe.This car combines technology and beauty. Highly stylised, itwas designed with great attention to safety and equipped withtop-rated engines in terms of environmental friendliness andperformance. Together with this new model, also the newtrademark was presented. This trademark will appear on allnew Fiat models, starting from the Bravo.

Two special events that occurred in 2006 also merit mention.The first was the presentation of the new Mirafiori MotorVillage at the end of May. This company-owned dealershipwas created in the Mirafiori premises, signalling the adoptionof a new philosophy that will soon be exported outside Italy.The second event was the joint presentation with Ikea of thenew interior designs of Fiat dealerships: a young, innovative,and functional style that combines simplicity of use for thecustomer and a consistent image at various dealerships.

Report on Operations Fiat Auto64

Alfa Romeo started selling the Alfa 159 Sportwagon inFebruary 2006, joining the sedan introduced at the end of 2005.The Alfa Spider was voted “Cabrio of the Year 2006” at itsGeneva Motor Show preview. This was followed by itspresentation to the press in June. Sales of the Q2 versions ofthe 147 and the GT started in January 2007. This version hasa two-wheel drive that offers greater stability and road hold,comparable to a four-wheel drive. Finally, the diesel versionof the Alfa Spider is scheduled for launch in March 2007.

At the end of November, Lancia celebrated the brand’s 100thanniversary. To mark the occasion, all Lancia models werealso sold in a particularly rich and exclusive centenary version.The New Ypsilon was rolled out at the end of September, afterbeing previewed at the beginning of September (on theoccasion of the Venice International Film Festival). The newDelta was also previewed at that festival, in anticipation of itsdebut in 2008.

There were major new product roll-outs at Fiat LightCommercial Vehicles as well. The New Ducato was introducedin May. It is destined to continue the success of a very popularmodel both inside and outside Italy. The New Scudo, which isproduced at the Sevel Nord plant in Valenciennes, France, wasintroduced in November and started being sold in January2007.

Product development activities were focused principally onthe completion of several minor changes for the Panda, GrandePunto, and Ypsilon, completion of development of the NewDucato, development of the Bravo, Croma FL, Fiat 500, Linea,and Minicargo, and the start of development on the new Alfa147 and Delta HPE.Research and development was also carried out oncomponents for future application, including engines andtransmissions.

Financial ServicesIn 2006, the financial services companies of the Sector saw theestablishment of the partnership between Fiat Auto and theCrédit Agricole group at the end of December. This agreementinvolved the creation of a 50-50 joint venture, named Fiat AutoFinancial Services, for the management of financing activities

In the renting business, Leasys, which operates in thecompany fleet segment, realised an operating turnaroundin 2006, reaping the fruits of a major corporate reorganisationand restructuring. The company wrote over 33,000 newcontracts, up significantly from 2005 due to the renewalof two major contracts with institutional customers.

Savarent consolidated its role as captive company operatingthrough the network of Fiat Auto dealerships. Its products areoffered primarily to small and medium-sized businesses andindividuals. In 2006 the company also wrote over 18,000 newcontracts, up 20% from 2005.

If the segment’s foreign companies are also counted, a total of60,100 contracts were written, up 52% from 2005. The Sector’sproprietary car fleet totalled over 134,000 units at December31, 2006, down 7% from 2005 as a result of the policyimplemented to focus on a higher profitability of the business.

Effective February 1, 2007, Fiat Auto changed its name to “FiatGroup Automobiles S.p.A.” Concurrently, four new companies were formed, 100% ownedby Fiat Group Automobiles S.p.A.: “Fiat Automobiles S.p.A.,”“Alfa Romeo Automobiles S.p.A.,” “Lancia AutomobilesS.p.A.,” and “Fiat Light Commercial Vehicles S.p.A.”. Theirproductive activities and personnel will remain part of FiatGroup Automobiles S.p.A. These changes are consistent with the new corporate culture ofthe Fiat Group. In particular, they reflect two strategic choicesof how it approaches the business: on the one hand, the unityof the Group, and on the other hand, the specificcharacteristics of the operating sectors and individual brands.

Report on Operations Fiat Auto 65

in Europe offered to Fiat Auto dealerships, end customerswho opt for instalment payment plans, as well as leasingand medium and long-term rental services. This alliancewith a major European bank group will enable the financialcompanies of the Sector to guarantee the level of fundnecessary for the development of services at primaryconditions. It will also make it possible to revive integratedmanagement of the three lines of activity (dealership financing,retail auto financing and car rental), which is fundamentalto winning the loyalty of Fiat Auto customers.

In more detail, the transaction is broken down as follows: FiatAuto, upon exercise of its call option, purchased from SynesisFinanziaria 51% of Fidis Retail Italia (a company controlling theFiat Auto European retail financing activities) which thenchanged its corporate name into Fiat Auto Financial Services.FAFS acquired certain Fiat Auto subsidiaries active in theEuropean long-term renting and Fiat Auto dealer financing.Fiat Auto sold to Sofinco, the wholly owned consumer creditsubsidiary of Crédit Agricole, 50% of the share capital of FAFS.

In the dealership financing segment, the Sector’s financialcompanies handled loans totalling approximately 12,400million euros (9,810 million euros in 2005). When combinedwith other financing instruments available to provide financingsupport to the dealer network, these operations generatedaverage financing of approximately 3,580 million euros (3,150million euros in 2005). The increase in volumes reflects theincrease in sales reported on most of the markets.

In the supplier financing segment, a total of approximately1,980 million euros in loans were handled (3,670 million eurosin 2005), generating an average financing of 260 million eurosin 2006 (560 million euros in 2005). This decrease was relatedto the company decision to reduce its commitment to thatactivity.


Operating PerformanceFerrari closed 2006 by confirming the extraordinary appeal ofits products, not only on traditional markets but also on morerecently developed ones. While maintaining its intrinsic cachetof exclusivity, in 2006 Ferrari increased end customerdeliveries by 4.8% to keep pace with growing demand. Itsprincipal objective was to reduce delivery wait time and meetthe demands of those new markets that reported particularlyinteresting growth trends. This result was achieved with theF430, in both the berlinetta and spider versions, and the new12 cylinder 599 GTB Fiorano.

In 2006, sales of homologated cars to the dealer networktotalled 5,650 units, up 5% from 2005. A total of 188 non-homologated cars were sold in 2006, compared with 18 unitsin 2005. The United States remained the principal market,with 1,709 units delivered (+8%). A total of 3,045 units (+4.7%)were sold in Europe, including 669 in Italy (+1%).

A total of 5,671 homologated cars were delivered to endcustomers, compared with 5,409 homologated cars in 2005,for an increase of 4.8%. The United States, Italy, the UnitedKingdom, and France made major contributions to the positivebalance for fiscal 2006. New or developing markets also madea substantial contribution (Middle East +84%, Eastern Europe+30%, and Asia/Pacific +15%), spurring a major increase involumes without compromising the exclusivity of the brand.A total of 121 cars, +95% from 2005, were sold in China thanksto a completely new commercial network.

Innovation and ProductsThe excellent results for 2006 were achieved thanks to theperformance of the F430, in both the berlinetta and spiderversions. These models are characterised by innovationsderived directly from Formula 1, such as the electronicdifferential and controls placed directly on the steering wheel.The 599 GTB Fiorano also made a major contribution to results.This model combines top performance and comfort withoutcompromise, and offers the most innovative and technologicallyevolved content applied by Ferrari to a 2-seater forward-centrally positioned engine car. It represents a new milestonein terms of sportiness, driving excitement, and design.

Report on Operations Ferrari 67

Ferrari

Report on Operations Maserati66

Operating PerformanceIn 2006, Maserati reported a distinct improvement in companyresults.

In the commercial area, the Quattroporte confirmed its positionas the top-selling model made by the Company, with over3,800 units sold. The new Executive GT and Sport GT versionscontributed to this result. It also continued to achievesuccesses inside and outside Italy, having been honoured on28 separate occasions since its introduction.

In 2006, in order to improve commercial focus on its principalmarkets, Maserati affiliates became operational in France,Germany, the United Kingdom, and Switzerland.

In the sports field, Maserati Corse won the FIA GT title in thedriver and team categories, and won the Spa 24-hour race forthe second year in a row.

In 2006, the market segments covered by the Coupé andSpyder models on Maserati’s eight principal markets enjoyedan overall increase in demand of 14.5% and 5.3%, respectively.

In the luxury sedan segment, the market expanded by 28.2%,thanks in part to the introduction of new models.

Maserati delivered 5,734 cars to the dealer network, for a 3%increase from the 5,568 units delivered in 2005. Overall growthstemmed primarily from the significant increases realised withthe Spyder and Coupé models, amounting to 27% and 12%,respectively. However, revenues were down slightly (-2.6%),since the previous year had benefited from sales of the specialMC12 street version, which was no longer sold in 2006.

In 2006, the United States confirmed its position as the mostimportant market for Maserati. With 2,310 units sold, theSector maintained the healthy level of volumes reached in2005. Excellent results were achieved in other countries,particularly in France, with an increase of 20%, in the UnitedKingdom and Japan, both up 15%. On new markets like Chinaand Russia, Sector deliveries grew respectively by 52% and 18%.

At December 31, 2006, Maserati had orders for 819 units(+3.8% from 2005), including 717 Quattroporte.

Innovation and ProductsIn 2006, major resources were dedicated to development ofnew models, which will flank the existing line following theirintroduction in 2007. The first of these is the new QuattroporteAutomatica. Production of this model got underway inNovember, in view of its introduction at the Detroit MotorShow in January 2007.

The MC Victory version was created for the Gransport line,which was introduced at the Geneva Motor Show in March2006 and produced in a limited series.

A limited edition of 12 cars derived from a racing model wasalso developed and put on sale.

In order to support Maserati dealers throughout the UnitedStates, an agreement between Maserati and CNH CapitalAmerica LLC for the supply of a number of finance solutionsdesigned exclusively for Maserati customers has becomeoperational in November 2006.

MaseratiHighlights


Net revenues 519 533Trading profit (33) (85)Operating result (*) (33) (85)Investments in tangible and intangible assets 82 20- of which capitalised R&D costs 32 9Total R&D expenses (**) 46 57Cars delivered (number) 5,734 5,568Employees at year-end (number) 649 606


Highlights


Net revenues 1,447 1,289Trading profit 183 157Operating result (*) 183 157Investments in tangible and intangible assets 142 142- of which capitalised R&D costs 46 46Total R&D expenses (**) 83 86Homologated cars delivered to the network (number) 5,650 5,381Employees at year-end (number) 2,870 2,809



Aggregates Manager, a North American publication,recognised Case Construction with its “Top Rollout” awardfor the new E Series wheel loaders and the CX700 excavator.

New Holland Construction launched pilot controls on skid steerloaders and compact track loaders in North America toenhance ease of operation and manoeuvrability. New HollandConstruction’s new Tier 3 wheel loaders, launched in NorthAmerica and Europe, offer new cabs with greater top visibilityduring loading operations. Construction Equipment Magazinealso included New Holland’s E215-ME excavator and its entirebackhoe product line in its “Top 100 Products for 2006”.

Meanwhile, Case New Holland won strong acclaim fromindustry observers with its spring announcement to theNational Biodiesel Board that it fully approves use of up toB20 blends (20% biodiesel/ 80% petroleum-based diesel) on allagricultural equipment currently produced with CNH engines.

ServicesBy refocusing efforts on their dealers and customers, CNH hasset the stage for continued future improvements. In particular:

n Case IH laid the groundwork to better serve and improveits dealer network, by launching the “Master Mechanic”program to create technically competent field service team.The program’s goal is to train and certify 11,000 dealertechnical service technicians;

n New Holland took steps to raise service and support levelsduring the harvesting season, introducing 24/7 parts and servicecoverage during the season, thereby reducing unit down time;

n In December, New Holland Construction Equipmentlaunched the Dealer Mechanics Council for Service & QualityOptimization. The group’s purpose is to establish direct two-way communication with manufacturing to validateand promote quality and reliability.

Report on Operations CNH 69

Agricultural and Construction EquipmentCNH-Case New Holland

Report on Operations CNH68

Operating PerformanceIn 2006, the worldwide market for agricultural equipmentreported contrasting trends for the main products and acrossthe various regions. Demand for tractors increased 9% overallas a result of extremely positive performances (+25%) in Restof the World markets, more modest growth in Western Europe(+3%), Latin America (+1%), and a 3% contraction on the NorthAmerican market. The combine market continued its negativetrend and contracted 7% overall from 2005.

CNH overall deliveries of tractors decreased from 2005, also aresult of actions to reduce dealer inventories. In particular, themost significant decline was reported in North America, wherevolumes were also influenced by market softness. Conversely,deliveries improved sharply in Latin America and were stablein Western Europe. CNH overall market share decreasedslightly while, at the single area level, an improvement wasreported in Latin America. CNH deliveries of combines to thenetwork declined overall: against the backdrop of anunfavourable market environment, decreases were reportedin the Americas and in Western Europe; only Rest of the Worldcountries bucked the trend reporting higher volumes withrespect to 2005. CNH overall market share was up thanks toan increased penetration of the North and Latin Americanmarkets.

In 2006, the global market for construction equipment grew11% overall from 2005. Demand for loader backhoes increasedby 7% thanks to significant increases in Latin America (+37%)and Rest of the World countries (+33%), in part offset by adecline in North America (-13%) and Western Europe (-2%).Worldwide market demand for skid steer loaders was down6% due to a decline in North America (-13%), against positiveperformances in other areas: Latin America (+30%), Rest of theWorld countries (+19%) and Western Europe (+3%). Demandfor heavy equipment was up 14%, with increases of 24% inLatin America, 3% in North America, 13% in Western Europeand 23% in Rest of the World countries.

In 2006, CNH benefited from rising demand, increasingdeliveries of construction equipment at a rate consistentwith or higher than that of the market in the various regions,with the exception of North America, where decreases werereported for all the main product lines. The Sector’s globalmarket share was unchanged from 2005, with increases inLatin America for all the main product lines.

Innovation and ProductsIn 2006 CNH made significant progress to renew and upgradeits product line by introducing new models, within theframework of the reorganisation of its operations into fourdistinct global brand structures, which started at the end of2005 and became fully operational in 2006.

In the agricultural equipment segment, Case IH launcheda number of new four wheel drive products equipped withTier 3 engines: six new models up to 530 engine HP and fournew models of the Magnum series up to 305 engine HP forwhich The Chicago Athenaeum Museum of Architecture andDesign, awarded the company’s industrial design firm andtwo of its engineers the 2006 Good Design Award for thenew styling.

The Case IH Axial-Flow 2388 combine and its edible bean kitwere the runaway gold medal winners of the OutstandingCategory in Brazil’s 2006 Gerdau Melhores da Terra contest.

Bolstered by launches of the CR and CSX combines in Europe,New Holland again confirmed its leading position in thecombine market.

In the construction equipment segment, Case ConstructionEquipment launched new Tier 3 wheel loaders and dozersfeaturing more spacious cabs and improved operating systemsboosting productivity and fuel efficiency. The CaseConstruction Equipment’s E Series wheel loaders and420CT / 440CT compact track loaders were named inConstruction Equipment Magazine’s “Top Products for 2006”.

Highlights


Net revenues 10,527 10,212Trading profit 737 698Operating result (*) 592 611Investments in tangible and intangible assets 394 255- of which capitalised R&D costs 79 40Total R&D expenses (**) 289 234Employees at year-end (number) 25,335 25,420



Report on Operations Iveco 71

In Eastern Europe, Iveco’s market share (GVW > 2.8 tons) roseto 11.8% in 2006 (+0.1 percentage points). Its market sharerose in the medium-vehicle segment, while remaining stablein the light-vehicle segment and contracting slightly in theheavy-vehicle segment.

The market share of Irisbus in Western Europe, 20.6% in 2006,rose 0.3 percentage points from 2005. In particular, its marketshare rose in France (+2.7 percentage points) and Germany(+1.3 percentage points), while remaining largely stable in Italyand falling in Spain (-1.2 percentage points) and Great Britain(-0.9 percentage points).

In 2006, Iveco delivered a total of 181,500 vehicles, including17,600 with a buy-back commitment, achieving growth of 5.2%from the previous year. In Western Europe, 135,100 vehicleswere delivered, for an increase of 3.2% from 2005. At theindividual country level, Germany and Spain reportedsignificant increases (for the light and heavy vehicle segmentsin Germany and for heavy vehicles in Spain), while Italy andGreat Britain, partly due to their soft markets, reporteddecreases in all segments (the decline in sales wasconcentrated in the light and heavy vehicle segments).

Outside Western Europe, sales volumes were up sharplyin Eastern Europe, rising in Africa and the Middle East, andvirtually stable in Latin America.

Iveco delivered a total of 9,300 buses, marking a 9.4%improvement over 2005.

In China, Naveco, the 50-50 joint venture with the NAC Group(Nanjing Automotive Corporation), sold approximately 20,000light vehicles (+11% from 2005). In Turkey, the licensee Otoyolsold 5,200 units (in line with 2005 results). In August 2006, Iveco sold its entire shareholding in Machen-Iveco Holding S.A., which controlled 51% of the Indiancompany Ashok Leyland Ltd.

Iveco gave significant impetus to its growth strategy in 2006,especially in China.

In September, Iveco signed an agreement with SAIC MotorCorporation Ltd and Chongqing Heavy Vehicle Group Co. Ltdto establish a joint venture in the field of heavy commercialvehicles. On the basis of this agreement, Iveco and SAIC setup a 50-50 joint venture named SAIC Iveco Commercial VehicleInvestment Company Ltd, for the acquisition of a 67% shareof the capital of Chongqing Hongyan Automotive Co. Ltd,controlled by the Chongqing Heavy Vehicle Group.

In September, Iveco signed a joint venture agreement withNAC, according to which Naveco will acquire all of thecommercial vehicle activities of the Yuejin Motor Company,a subsidiary of NAC. This acquisition falls within the scopeof Iveco’s strategy to offer a complete range of commercialvehicles in China.

Trucks and Commercial VehiclesIvecoOperating PerformanceSince January 1, 2006, Iveco powertrain activities have beenincluded in the Fiat Powertrain Technologies Sector. Asenvisaged in IAS 14 – Segment Reporting, the figures for2005 have consequently been reclassified by excluding thepowertrain activities from Iveco and allocating them to FPT.

In 2006, demand for commercial vehicles in Western Europe(GVW > 2.8 tons) totalled 1,132,300 units, up 2.3% from 2005.On the principal markets, demand rose in France (+3.6%) andGermany (+3.2%), while contracting slightly in Italy (-1.9%),Great Britain (-1.1%), and Spain (-0.2%).

The light-vehicle segment (GVW of between 2.8 and 6 tons)grew by 1.8% from 2005. Among the main countries, a marketincrease was reported in France (+6.4%), while in Great Britainthe market remained stable with virtually the same volumes as2005, and it contracted in Italy (-2.8%), Germany (-0.6%), andSpain (-1.2%).

Demand for medium-vehicles (GVW of between 6.1 and 15.9tons) was also up (+1.9%) from 2005. This improvement wasinfluenced principally by the German market (+7.4%) andSpanish market (+2.3%). Demand fell on the British (-8.2%),Italian (-3.4%), and French (-2.3%) markets.

Demand for heavy-vehicles (GVW >16 tons) rose by 3.7%from the previous year. The greatest increase was reportedin Germany (+11.9%); modest growth was reported in Spain(+1.9%) and Italy (+1.5%), while demand fell in France (-3.9%)and Great Britain (-2.7%).

Report on Operations Iveco70

In 2006, the demand for commercial vehicles in Eastern Europe(GVW > 2.8 tons) rose to 114,000 units (+23.7% from 2005).The most significant increase was reported for the heavy-vehicle segment (+36.3% from 2005).

The Western European bus market remained at substantiallythe same level as in 2005 (34,600 units), due to offsettingbetween the increases in France (+7.5%) and Germany (+6.9%)and the decreases in Spain (-7.4%), Italy (-3.9%), and GreatBritain (-2.6%).

The market share of Iveco in Western Europe (GVW > 2.8 tons)was 10.7% (-0.2 percentage points from 2005). Its share of thelight-vehicle segment was 9.1% (-0.2 percentage points). TheDaily confirmed its position as the absolute leader in the 3.5ton segment, with 17% of the market. In the medium-vehiclesegment (Eurocargo), Iveco’s share, while contracting by 0.9percentage points, was still 25.4%, confirming the Sector’sposition as co-leader on the European market. In the heavy-vehicle segment, Iveco’s market share was 10.9% (11.1% in 2005).

Highlights


Net revenues 9,136 8,483Trading profit 546 332Operating result (*) 565 212Investments in tangible and intangible assets (**) 342 321- of which capitalised R&D costs 88 115Total R&D expenses (***) 174 211Employees at year-end (number) (****) 24,533 24,323

(*) Including restructuring costs and unusual income (expenses).(**) Net of vehicles sold with buy-back commitments.(***) Including R&D capitalised and charged to operations.(****) Excluding employees of the powertrain activities conveyed in FPT

(8,256 at December 31, 2006 and 8,050 at December 31, 2005).

Sales PerformanceTrucks and Commercial Vehicles sold by Country

(in thousands of units) 2006 2005 (*) % change

- France 25.9 25.6 1.1- Germany 20.3 16.8 21.0- Great Britain 15.0 16.6 -9.9- Italy 36.0 37.9 -5.1- Spain 20.6 19.3 7.1- Other Western European Countries 17.3 14.8 17.5Western Europe 135.1 131.0 3.2Eastern Europe 19.7 15.8 25.0Rest of the World 26.7 25.7 3.5Total units sold 181.5 172.5 5.2Naveco 20.0 18.0 11.1Other associated companies (**) 5.2 64.8 n.s.Grand total 206.7 255.3 n.s.

(*) Figures for 2005 present a break-down by country different from the one published in the 2005 Annual Report as a result of an allocation of deliveries modified according to the criterion adopted for 2006.

(**) Units sold by the Indian company Ashok Leyland are no longer included as it was sold in August 2006. The 2005 figure included 59,600 units sold by said company.

Sales Performance Trucks and Commercial Vehicles sold by Product Segment


Heavy 45.2 42.8 5.6Medium 21.8 21.3 2.3Light 100.6 95.7 5.1Buses 9.3 8.5 9.4Special purpose vehicles (*) 4.6 4.2 9.5Total units sold 181.5 172.5 5.2

(*) Astra, Defence and Fire-fighting vehicles.

Trucks and Commercial Vehicles Market (GVW ≥ 2.8 tons)


France 200.7 193.8 3.6Germany 246.0 238.3 3.2Great Britain 194.4 196.6 -1.1Italy 120.2 122.6 -1.9Spain 118.3 118.4 -0.2Other Western European Countries 252.7 237.6 6.4Western Europe 1,132.3 1,107.3 2.3

Trucks and Commercial Vehicles Market (GVW ≥ 2.8 tons)


Heavy 260.2 250.8 3.7Medium 80.6 79.1 1.9Light 791.5 777.4 1.8Western Europe 1,132.3 1,107.3 2.3


In the second quarter of 2006, a letter of intent was signedby Iveco and the Spanish company Santana. It defines thegeneral principles for cooperation on product developmentand a long-term commercial policy. This involves study ofsolutions in the field of light-range 4-wheel drive vehicles.

Innovation and Products2006 was characterised by resurgent activity in the sectorof innovative active and passive safety systems. In particular,the “Safety Truck” project (for a concept vehicle focusing onsafety) launched a series of integrated technical solutions that,by streamlining the use of sensors and technologies withdifferent origins, enabled a leap in technology quality in thisfield.

In the field of advanced materials, research projects wereundertaken to provide a competitive response to applicationsin the vehicles sector (cabin, frame, power generation andtransmission).

Studies were carried out on the structure of the vehicle, forapplication of materials that can offer significant benefits (interms of weight, cost, and passive safety), such as high andultra-high resistant steel, light alloys for moving parts, andstructural components. In regard to the interior and exteriorof the cabin, studies and assessments were performed on theuse of structural and decorative plastics, multifunctional glass,and acoustically insulated materials.

In the kinematics chain field, studies continued on the useof new lubricants and systems for monitoring their wearand tear.

Innovation also involved prototypes of low-emission lightcommercial vehicles with diesel and methane internalcombustion engines.

Iveco continued restyling of its product range in 2006.

The New Daily Euro 4 was introduced in May 2006, in the van,cabin, and minibus versions, all with Euro 4 compliantengines. Presented with the slogan “Professional DNA”,

Report on Operations Iveco 73Report on Operations Iveco72

the New Daily is confirming its position as the most solidand reliable vehicle in the segment. It can be equippedwith a stability control system, a cutting-edge electricaland electronic system. The vehicle has been a great success.At December 31, 2006, about 50,000 orders had been receivedthroughout Europe.

At the 61st Hanover 2006 Motor Show, Iveco showcasedthe Stralis, Trakker, Eurocargo, and New Daily vehicles,and presented the Astra ADT30 dumper for extremely heavyquarry activities, the Superdragon x8 airport fire-fightingvehicle, the Iveco Magirus fire appliance ladder, the Citelisurban transport bus, and the New Domino people carrier.It also presented a prototype heavy vehicle comprised bya semi-tractor trailer rig on a Stralis AS base.

At the AUTOTEC Motor Show held in Brno, Czech Republic,Irisbus presented the new Crossway bus, which is availablein three lengths and with two different powertrains (Tectorand Cursor Euro 4). The new rigid structure of the Crosswayenables it to comply fully with the ECE R66 passenger safetyregulation.

Services Iveco Customer Service reported an increase in activitiesconnected with the increase in circulating vehicles and inthe number of trips annually by vehicle as well as the successof the customer loyalty program.

The Iveco Customer Centre confirmed its performance in thearea of 24-hour assistance, assuring high standards of servicefor response times to customers. It also consolidatedits supply of direct marketing services and upgradedmanagement of customer relations, using the Web asa supplementary channel for contact.

In 2006, the logistical structures for distribution of bus spareparts were integrated with commercial vehicle spare parts,unifying operations and infrastructure in Italy, Spain, andGermany (after France in 2005). The basis was also laid forimproving the distribution service in Central and Eastern

Europe, by identifying further opportunities for synergyand development with the Iveco Cekia logistic centre.

In order to handle increasingly complex repair requirements,due to the increasing use of electronic components onvehicles, Iveco Technical Assistance worked on three keyfactors in 2006: a) powerful but easy to use diagnosticinstruments, b) adequate dealer network skills, c) roadsideassistance coverage on international routes for heavy vehiclesand increased coverage for light vehicles.

After the 2005 agreement with Barclays Mercantile BusinessFinance Ltd, the financial services activities for Iveco productsin France, Germany, Italy, Switzerland, and the UnitedKingdom were managed by the associated company IvecoFinance Holdings Limited, in which Iveco holds a 49% interest.

Including the activity of this associated company, the numberof vehicles financed rose from 34,700 in 2005 to 35,800 in2006, with a penetration of 23.4%, largely unchanged fromthe previous year.


Report on Operations Fiat Powertrain Technologies 75

In the methane engine segment, activity continued withintroduction of the Fire 1.2 CNG (Compressed Natural Gas)engine to be used on the Panda.

In the diesel engine area, the number of versions offered with thediesel particulate filter (DPF) was increased and development onthe new 1.6 Diesel continued, with production to start soon.

In the transmission segment, Q2 content was developedfor the C530 6M gearbox, to be used on the Alfa Romeo 147 andGT models. This will offer driving and safety performance ontwo-wheel drive cars that is similar to cars equipped with four-wheel drive.

During the year, production of the transmission made atthe Termoli plant and sold to Sevel got underway. Thistransmission is used not only on the Ducato but also onthe commercial vehicles of the Peugeot and Citroën brands.

For the future, work will continue on developing thetechnological leadership of the common rail engine (latestgeneration Multijet), relaunching the Fire family and gasolineengines in general, improving quality, and reducing fuelconsumption. Development of the new 2.0 Diesel engine,extension of supercharging to other families of gasoline engines,including in tandem with fuel injection, and development ofinnovative content for transmission systems point in thisdirection.

Huge resources were allocated in 2006 for the developmentof cutting-edge powertrains in terms of exhaust emissions.These involve projects aimed at compliance with the Euro 5 andEuro 6 standards. The target date for start of production on Euro5 powertrains is the second half of 2008, in advance of thedeadlines envisaged in applicable EU regulations.

In view of cutting CO2 emissions, and thus fuel consumption,the CAFE (Corporate Average Fuel Economy) plan agreed on withFiat Auto continued. This will make it possible to respect the fuelconsumption limit self-imposed by European car makers.

Industrial & MarineThe product line’s objective is to design and manufactureengines for vehicle applications (on-highway) and industrialand agricultural applications (off-highway).

In 2006, the product line initiated production of all versionsof Euro 4 diesel engines for automotive applications and gasversions for urban mass transit.

In the light-range engine segment, FPT- I&M started productionon the F1A 2.3 litre 136hp and F1C 3 litre up to 176hp enginesthat equip the Daily and the Ducato. Versions equipped withthe diesel particulate filter were also developed. These reduceemissions of the solid particles typical of diesel engines almostto zero.

The 4 and 6 cylinder Tector engines in the medium-rangesegment, and the Cursor 6 cylinder 8, 10, and 13 litre rangein the heavy engine segment, were made also Euro 5compliant, in advance of the effective date of the standard,scheduled for 2009.

For off-highway applications, the NEF 4 and 6 cylindercommon rail engines that comply with TIER 3 pollutionstandards were introduced. A new engine is being developedfor CNH, that will be used on agricultural and industrialequipment with a power of up to 100hp. For this engine,evolutions in its design are planned so as to bring it incompliance with TIER 4 stage 1 limits, which will come intoeffect in 2012. Beginning from the second half of 2006, theCURSOR range for agricultural and industrial applications hasbeen expanded to embrace a version that has adopted thecommon rail injection system for the first time in this range.

Looking to the future, FPT - I&M plans to reinforce itstechnological leadership in the field of engines for the wholerange of truck, agricultural, industrial, and marine applicationsand complete development of the technologies that will benecessary to meet future legal limits on pollution, while alsoreducing fuel consumption.

Operating PerformanceSince January 1, 2006, the Fiat Powertrain Technologies Sector(FPT) no longer comprises only the passenger vehicle engineand transmission activities, over which Fiat regained control inMay 2005 following termination of the Master Agreement withGeneral Motors, but also the powertrain activities that wereincluded in the Iveco Sector until December 31, 2005.

As envisaged in IAS 14 – Segment Reporting, the figures for2005 have consequently been reclassified, by assigning theformer Iveco powertrain activities to Fiat PowertrainTechnologies.

Since 2006, Fiat Powertrain Technologies also comprisesthe powertrain research activities of C.R.F. In addition, withinthe framework of its technological development projects, FPTcoordinates Elasis powertrain activities.

Fiat Powertrain Technologies activities in the passengervehicle engine and transmission segment are organized intothe Passenger & Commercial Vehicles (P&CV) product line.The former Iveco powertrain and axle activities were assignedto the Industrial & Marine (I&M) product line.

Part of the Sector’s output was sold to other Fiat GroupSectors, while sales to third parties and joint venturesrepresented approximately 26% of revenues in 2006. In 2006,the Sector benefited from the rising sales volumes of itsprincipal customers, particularly Fiat Auto, reporting growthof 11% on a comparable basis from the previous year.

The Passenger & Commercial Vehicles product line sold2,328,000 engines in 2006, approximately 22% of whichwere diesel engines sold to General Motors and Suzuki,and 1,695,000 transmissions, mainly sold to Fiat Auto.

The Industrial & Marine product line sold 444,000 engines(+1.9% from 2005), mainly to Iveco (44%), CNH (19%), and for24% to Sevel, the joint venture between Fiat Auto and the PSAGroup. Furthermore, 113,000 transmissions (-1.4%) and262,000 axles (+9.3%) were sold.

Several important agreements reached by the Fiat Group withinternational partners involved Fiat Powertrain Technologies.

In December 2006, FPT, Iveco and SAIC Motor Corporationsigned an agreement to establish a long-term partnershipin China in the field of medium and heavy diesel engines.Industrial plans include the manufacturing of three differentmedium and heavy engine ranges: F5, NEF (4 and 6 cylinderversions), and Cursor 9.

An agreement was initialled towards the end of the year withthe Indian Tata Motors Group. It envisages production in Indiaof the small diesel engine (SDE), Fire family gasoline engines,and transmissions.

In December 2006, FPT and the Russian company SeverstalAuto announced the signing of a Memorandum ofUnderstanding for the establishment of a joint venture inRussia to produce the F1A diesel engine to be installed on theFiat Ducato and homologated for Severstal Auto’s new SUV.

Innovation and Products

Passenger & Commercial VehiclesDuring the year, work continued on developing innovativepowertrains for Fiat Auto, to be used on Fiat, Lancia, and AlfaRomeo branded cars.

In the gasoline engine segment, efforts continued to focus ondevelopment and initial industrialisation of turbo versions inthe Fire family, in the 120hp and 150hp versions for the FiatBravo and Fiat Grande Punto models.

Report on Operations Fiat Powertrain Technologies74

Fiat Powertrain TechnologiesHighlights


Net revenues 6,145 4,520Trading profit 168 109Operating result (*) 102 81Investments in tangible and intangible assets 254 296- of which capitalised R&D costs 50 60Total R&D expenses (**) 74 68Employees at year-end (number) (***) 18,924 18,161

(*) Including restructuring costs and unusual income (expenses).(**) Including R&D capitalised and charged to operations.(***) Including Iveco employees of the powertrain activities conveyed in FPT: 8,256

at December 31, 2006 and 8,050 at December 31, 2005.


Work on product development focused on newly launchedmodels such as the Bravo, New Ducato, new Fiat 500 and othermodels for PSA. In terms of innovation, the business unitworked on projects associated with an evolved version ofthe Torcs suspension and the program for the electronic SDCSynaptic Damping Control system.

Major orders for shock absorbers were booked in 2006 fromTofas in Turkey, Renault in Romania, Fiat, Volkswagen, GeneralMotors and PSA in Brazil, and General Motors in the UnitedStates. In Europe, the unit was awarded an order for thecomplete suspension system on the new Fiat 500.

Electronic SystemsTotal revenues for 2006 amounted to 534 million euros,up 4.1% from 2005.

Fiat and PSA continued to be the Electronic Systems businessunit’s largest customers, with a significant increase beingrecorded for Fiat (+28%). As for third parties, there was a sharpincrease in sales to the Volkswagen-Audi group (+50% from 2005).

In 2006, new products were introduced around the world,including instrument panels for Fiat, Volkswagen and Audi,antenna modules for Volkswagen and Renault, and anavigation system for PSA.

Orders were received for the new generation of navigationsystems for PSA and SAIC, the Fiat radio/navigation system,and instrument panels for Audi and Renault.

Exhaust SystemsIn 2006, revenues totalled 533 million euros, a significantincrease of 31.9% from the previous year.This sharp rise in revenues was fuelled by sales to Fiat andMercedes, where the latter was supplied with exhaust systemsfeaturing a DPF diesel particulate filter. Sales also increased in theMercosur, thanks to strong demand from local customers.Major production startups included systems for the Fiat Bravo andNew Ducato, and the cold-end exhaust system for Volkswagen.

New orders booked include the DPF system for the 1.3 smalldiesel engine of Fiat Powertrain Technologies.

MotorsportMagneti Marelli participates in the major motorsportchampionships as a technical partner. In 2006, it suppliedelectronic control systems, fuel system and electromechanicalcomponents, and telemetry and data acquisition systems to theleading Formula 1 teams. In addition to Formula 1, MagnetiMarelli is also active in other championships. It participates inthe World Rally Championship, supplying electronic controlsystems to various teams, and in the Moto GP championship,where it provided fuel injection and electronic systems toYamaha, Ducati and Kawasaki. Magneti Marelli also helpedbring Maserati to victory in the FIA GT1 championship.

Report on Operations Magneti Marelli 77

Operating PerformanceAgainst the backdrop of a market that expanded 4.3%, MagnetiMarelli increased its revenues by 14.2% on a comparableconsolidation basis.

The major orders booked for new car models will enablethe Sector to further diversify its customer portfolio.

In the first half of 2006, the Sector sold to Fiat Auto S.p.A.and Sata S.p.A the manufacturing and assembly activitiesof the Suspension Systems earmarked for Fiat models. Theseactivities are carried out at the Cassino, Pomigliano d’Arco,Melfi and Mirafiori plants.

Highlights of the performance of each business unit areoutlined below.

Lighting GroupIn 2006, revenues totalled 1,402 million euros, up 11.2% from2005.

In 2006, approximately 80 new production programs werelaunched which, together with the positive sales performanceof current products, enabled Magneti Marelli to achievesignificant market shares worldwide for both headlamps (14%)and taillamps (13%).

In terms of innovation, LED headlamps and taillamps are nowbeing developed, together with a new concept in optical lensesfor future generations of low-beam headlamps and the world’sfirst design for a headlamp unit using LED technology for allrequired functions. Reliable manufacturing processes,competitive prices and high quality standards have enabled thebusiness unit to maintain excellent relationships with carmakers and attract new orders.

Positive developments in this area included the orders receivedfrom Renault Nissan, and the start of commercial dealings withSuzuki: an important launching pad for entry ontothe Japanese market.

Report on Operations Magneti Marelli76

Powertrain (Engine Control)Revenues for 2006 totalled 882 million euros, an increase of 11.9%from the previous year. As regards the product mix, demand forspark ignition engine systems slowed in favour of their dieselcounterparts.

The revenue increase involves all customers of the business line,in particular Fiat Auto and Fiat Powertrain Technologies (for atotal of +22%) and customers in the China area. Good salesperformance was also achieved by the Tetrafuel system (whichenables environmentally-friendly vehicles to run on four fueltypes) which combines the ability to meter four types of fuel in asingle control unit, supplied to Fiasa in Brazil. A number of majorproduct launches also took place, including that for mechatronicSelespeed systems for PSA and GM-Opel in Europe and forChery in China.

Orders received during the year included the Selespeedapplications and gasoline systems for Chery, the gasoline systemfor the new Fire engine of Fiat Powertrain Technologies, andFlexfuel systems for Fiasa, Ford and PSA in Brazil.

Cofap Automotive SuspensionIn 2006, the business unit had revenues of 1,103 million euros(1,052 million euros in 2005), an increase of 20% from theprevious year’s figure on a comparable consolidation basis.The increase in volumes is connected to the success of Fiat’snew models and the introduction of new products for GM-Opeland PSA.

Components – Magneti MarelliHighlights


Net revenues 4,455 4,033Trading profit 190 162Operating result (*) 175 127Investments in tangible and intangible assets 293 313- of which capitalised R&D costs 77 67Total R&D expenses (**) 217 197Employees at year-end (number) 25,195 24,213



Operating PerformanceIn 2006, the Sector’s reference market continued to beimpacted by uncertainty, shrinking volumes and intensepressure on prices.

Car manufacturers in the Western World generally scaled backtheir investment programs, but they did not stop introducingnew models on the market. They continued to focus onconverting existing facilities and rationalising productioncapacity, while greenfield investments were suspended orpostponed.

By contrast, a number of countries in Asia and Eastern Europehave shown an increase in investments, often through jointventures between Western car manufacturers and localpartners.

The unfavourable market conditions negatively impactedComau revenues, which decreased by approximately 18.6%from 2005 mainly due to a slowdown in activity levels at theEuropean Body-welding operations.

To meet the challenge of slow markets, flagging order intakeand diminishing revenues, Comau embarked on a restructuringprogram in the third quarter of 2006, reshaping the scope ofits activities and presence in the countries where it operates.The programme will start to show benefits in 2007, while itsfull effect on profitability will be achieved from 2008 onwards.

With markets shrinking, order intake totalled 1,194 millioneuros in 2006, down approximately 16% from 2005.

In 2006, new orders for contract work came to 929 millioneuros, down 23% from 2005. Overall, 54% of the orders forcontract work were acquired in Europe, 27% in the Nafta area,while the remaining 19% came from the Mercosur and newmarkets (5% in China). 32% of all orders came from Fiat Groupcompanies and 68% from other manufacturers. AtDecember 31, 2006 the order backlog totalled 593 millioneuros, down approximately 15% from 2005.

For Service operations, 2006 saw a significant increasein orders (+11%), reaching a value of 265 million euros(25% of which coming from Fiat Group companies).

Report on Operations Comau 79Report on Operations Teksid78

Operating PerformanceIn 2006, an unsettled energy market continued to put strongpressure on the metallurgical industry. Against this challengingbackground, the Sector’s diversification in terms of customers,products and geographical destination, as well as ongoingimprovements in process efficiency and logistics, made itpossible to improve overall performance.

In 2006, a French company (SBFM) active in the Cast Ironbusiness was sold. Excluding the impact of this sale, Teksidrevenues would have increased (+3.5%) with respect to theprevious year.

Revenues of the Cast Iron Business Unit decreased by 5.6%and volumes by 6.5%. The change is connected to thementioned sale of SBFM. On a comparable basis, revenueswould have increased by 7.2% due to both higher volumes(+1.5%) and the favourable effect of exchange rates, theBrazilian real in particular. Brazil was the highest growing areaalso in terms of revenues.

It is worth noting that in the Cast Iron business, Teksid is alsoactive in China through Hua Dong Teksid Automotive FoundryCo. Ltd, a jointly controlled company accounted for using theequity method. This company recorded a 20.2% increase involumes from 2005.

The Magnesium Business Unit (where Teksid operates throughMeridian Technologies Inc., in which Teksid holds a 51%interest and Norway’s Norsk Hydro group the remaining 49%)recorded a reduction in both revenues (-5.2%) and volumes (-6.2%) due to a slowdown in the reference market, inparticular the North American market, which neverthelesscontinued to account for approximately 80% of revenuesin 2006.

As part of Teksid’s strategy to focus on its core business,in December 2006 the Fiat Group and Norsk Hydro reachedan agreement for the sale of their interests in MeridianTechnologies Inc. to a consortium of investors headed bythe Swiss holding company Estatia AG. Completion of thetransaction is subject to approval by competent authorities(received in 2007) and closing of the financing to the purchaserby financial institutions.

Metallurgical Products – Teksid Production Systems – ComauHighlights


Net revenues 979 1,036Trading profit 56 45Operating result (*) 26 27Investments in tangible and intangible assets 32 45Total R&D expenses (**) 5 5Employees at year-end (number) 8,342 8,952


Highlights


Net revenues 1,280 1,573Trading profit (66) 42Operating result (*) (272) (8)Investments in tangible and intangible assets (**) 56 38- of which capitalised R&D costs 7 9Total R&D expenses (***) 20 20Employees at year-end (number) 12,293 12,725

(*) Including restructuring costs and unusual income (expenses).(**) The 2006 figure includes 34 million euros for investments by Comau North America

related to sales/leaseback transactions carried out in previous years. (***) Including R&D capitalised and charged to operations.


Operating Performance In 2006, average daily sales of newspapers in Italy roseby around 2% over the previous year.

The Italian advertising market as a whole grew by 2.4% over2005, slightly less than 2005’s 2.8% despite such major mediaevents as the national elections, Olympic Games and WorldCup soccer championships. Performance by the various mediawas far from uniform. The Internet boom overshadowed themoderate growth in periodicals and newspapers (outperformedonce again by the free press) and radio. Television in generalshowed zero growth (though satellite TV made majoradvances), while billboards and cinema advertising droppedsignificantly.

Editrice La Stampa S.p.A. reported an average daily circulationof 310,000 copies in 2006, a 1% drop from the 312,000 copiesin 2005. This erosion was largely due to the fact that the jointmarketing arrangement with Editoriale Corriere di Romagnawas discontinued in September 2006, as well as to lowernewsstand sales.The value of production was 170 million euros, against 169million euros in 2005. This result is largely attributable tohigher advertising revenues and higher revenues fromadditional items leveraging the paper’s brand name, whichoffset the downturn in revenues from newspaper sales.

Publikompass S.p.A. booked advertising billings of 332 millioneuros in 2006, compared with 328 million euros in 2005. Thisslight (+1%) increase was largely due to higher revenues fromnewspaper advertising, which offset the drop in income fromperiodicals and audiovisual media, an area where sales ofadvertising space with Warner Village did not entirely makeup for the loss of Rete A.

In May 2006, distribution activities for the daily La Stampawere assigned to a company set up for this purpose (To-disS.r.l.) and active in the distribution of publishing products,in which M-dis S.p.A. holds a 55% interest and Editrice LaStampa a 45% interest.

On November 19, 2006, a new all-colour tabloid formatfeaturing an original graphic layout was introduced for thedaily La Stampa. On the same date, the new version of thenewspaper’s website went on-line, with graphics matchingthose of the paper and more sections and wider coveragethan ever before.

Report on Operations Itedi 81Report on Operations Business Solutions80

Operating PerformanceIn 2006, the Sector continued its process of transformationlaunched in the previous years. On the one hand, it continuedto sell businesses that are no longer considered priorityactivities and on the other hand it focused on reassigningservices provided to the Fiat customer. At the same time, theseactivities were conveyed in the subsidiary Fiat Services S.p.A.(formerly Fiat Gesco S.p.A.).

At the Human Resources unit, initiatives to boost efficiencycontinued and a reorganisation process was undertakento refocus the unit on specialised, institutional and socialassistance services to be provided in support of the Group’semployees and personnel departments.

The Administration unit continued to improve its transactionalprocesses in terms of quality and efficiency, as did the I.C.T. -Information and Communication Technology unit, which alsofinalised the sale of Atlanet.

For the Facility Management unit, in December 2006 anagreement was signed with the Pirelli & C. Real Estate groupfor the sale of the activities performed by Ingest Facility (Italy,Poland and France).

Finally, in June 2006 the investment in Sestrieres S.p.A., a ski lift and cable car operator, was sold.

Effective January 1, 2007, Services operations, includingpayroll activities, were transferred to Fiat Services S.p.A.,which is organised in three service units: TransactionalProcesses (Finance and Payroll), ICT Services and CustomsServices.

From 2007 onwards, Fiat Services S.p.A. and its subsidiariesoutside of Italy will be reported under Holding companies andOther companies, and the Business Solutions Sector will thusno longer be represented.

Publishing and CommunicationsItediServices – Business Solutions

Highlights


Net revenues 401 397Trading profit 11 16Operating result (*) 12 13Investments in tangible and intangible assets 45 20Employees at year-end (number) 836 846

(*) Including restructuring costs and unusual income (expenses).

Highlights


Net revenues 668 752Trading profit 37 35Operating result (*) 28 7Investments in tangible and intangible assets 10 19Employees at year-end (number) 5,057 5,436

(*) Including restructuring costs and unusual income (expenses).


Motion for Approval of the FinancialStatements and Allocation of the 2006Net Income

Stockholders,

We submit for your approval the Financial Statements for thefiscal year ended December 31, 2006, the first prepared inaccordance with International Financial Reporting Standards(IFRS), and we propose that the net income for the year of2,343,374,972 be allocated as follows:

n 553,411,863 euros to fully cover the losses carried forward;n 89,498,155 euros to the Legal Reserve;n to Stockholders a dividend of:– 0.155 euros per ordinary share (equivalent to approximately

169.3 million euros); – 0.31 euros per preference share (equivalent to approximately

32 million euros);– 0.93 euros per savings share (equivalent to approximately

74.3 million euros), which include the dividend of 0.31 eurospertaining to 2006, and the two dividends of 0.31 euros eachpertaining to 2005 and 2004, when no dividend was paid;

n to Retained earnings the residual amount (equal toapproximately 1,424.9 million euros).

The ex-dividend date is May 24, 2007, with detachment ofthe coupon on May 21, 2007. It will be paid to the sharesoutstanding at the coupon detachment date, excluding treasuryshares.


On behalf of the Board of Directors


Report on Operations Motion for Approval of the Financial Statements and Allocation of the 2006 Net Income 83


In archery we have something like the way of the superior man. When the archer misses the centre of the target, he turns round and seeks for the cause of his failure in himself. Confucio

Fiat Group Consolidated FinancialStatements at December 31, 2006

Consolidated Income Statement

Consolidated Balance Sheet

Consolidated Statement of Cash Flows

Statement of Changes in Stockholders’ Equity

Consolidated Income Statement pursuant to ConsobResolution No. 15519 of July 27, 2006

Consolidated Balance Sheet pursuant to ConsobResolution No. 15519 of July 27, 2006

Notes to the Consolidated Financial Statements

Appendix – The Companies of the Fiat Group

86

87

89

90

91

92

93

199

(in millions of euros) Note At December 31, 2006 At December 31, 2005

ASSETSIntangible assets (13) 6,421 5,943Property, plant and equipment (14) 10,540 11,006Investment property (15) 19 26Investments and other financial assets: (16) 2,280 2,333- Investments accounted for using the equity method 1,719 1,762- Other investments and financial assets 561 571Leased assets (17) 247 1,254Defined benefit plan assets (26) 11 –Deferred tax assets (11) 1,860 2,104Total Non-current assets 21,378 22,666Inventories (18) 8,447 7,881Trade receivables (19) 4,944 4,969Receivables from financing activities (19) 11,743 15,973Other receivables: (19) 2,839 3,084- Current tax receivables 808 778- Others 2,031 2,306Accrued income and prepaid expenses (20) 247 272Current financial assets: 637 1,041- Current investments 31 31- Current securities (21) 224 556- Other financial assets (22) 382 454Cash and cash equivalents (23) 7,736 6,417Total Current assets 36,593 39,637Assets held for sale (24) 332 151TOTAL ASSETS 58,303 62,454- Total assets adjusted for asset-backed financing transactions 49,959 51,725

(*) Pursuant to Consob Resolution No. 15519 of July 27, 2006, the effects of related party transactions on the Consolidated Balance Sheet are presented in the specific Balance Sheet scheduleprovided in the following pages and are further described in Note 35.

Fiat Group Consolidated Financial Statements at December 31, 2006 87

Consolidated Balance Sheet(in millions of euros) Note 2006 2005

Net revenues (1) 51,832 46,544Cost of sales (2) 43,888 39,624Selling, general and administrative costs (3) 4,697 4,513Research and development costs (4) 1,401 1,364Other income (expenses) (5) 105 (43)Trading profit 1,951 1,000Gains (losses) on the disposal of investments (6) 607 905Restructuring costs (7) 450 502Other unusual income (expenses) (8) (47) 812Operating result 2,061 2,215Financial income (expenses) (9) (576) (843)Unusual financial income (9) – 858Result from investments: (10) 156 34- Net result of investees accounted for using the equity method 125 115- Other income (expenses) from investments 31 (81)Result before taxes 1,641 2,264Income taxes (11) 490 844Result from continuing operations 1,151 1,420Result from discontinued operations – –Net result 1,151 1,420

Attributable to:Equity holders of the parent 1,065 1,331Minority interests 86 89

(in euros)

Basic earnings per ordinary and preference share (12) 0.789 1.250Basic earnings per savings share (12) 1.564 1.250Diluted earnings per ordinary and preference share (12) 0.788 1.250Diluted earnings per savings share (12) 1.563 1.250

(*) Pursuant to Consob Resolution No. 15519 of July 27, 2006, the effects of related party transactions on the Consolidated Income Statement are presented in the specific Income Statementschedule provided in the following pages and are further described in Note 35.

Fiat Group Consolidated Financial Statements at December 31, 200686

Consolidated Income Statement (*) (*)


A) Cash and cash equivalents at beginning of period 6,417 5,767B) Cash flows from (used in) operating activities during the period:

Net result 1,151 1,420Amortisation and depreciation (net of vehicles sold under buy-back commitments) 2,969 2,590(Gains) losses on disposal of:- Tangible and intangible assets (net of vehicles sold under buy-back commitments) 32 (109)- Investments (607) (905)Other non-cash items (a) 7 (547)Dividends received 69 47Change in provisions 229 797Change in deferred income taxes (26) 394Change in items due to buy-back commitments (b) (18) (85)Change in working capital 812 114Total 4,618 3,716

C) Cash flows from (used in) investment activities:Investments in:- Tangible and intangible assets (net of vehicles sold under buy-back commitments) (3,789) (3,052)- Investments in consolidated subsidiaries (931) (39)- Other investments (686) (28)Proceeds from the sale of: - Tangible and intangible assets (net of vehicles sold under buy-back commitments) 387 427- Investments in consolidated subsidiaries 47 46- Other investments 1,157 27Net change in receivables from financing activities (876) (251)Change in current securities 223 (159)Other changes (c) 3,078 2,494Total (1,390) (535)

D) Cash flows from (used in) financing activities:New issuance of bonds 2,414 –Repayment of bonds (2,361) (1,868)Issuance of other medium-term borrowings 1,078 916Repayment of other medium-term borrowings (2,144) (1,175)Net change in other financial payables and other financial assets/liabilities (d) (717) (712)Proceeds from the increase in capital stock (d) 16 –Proceeds from the sale of treasury stock 6 –Dividends paid (23) (29)Total (1,731) (2,868)Translation exchange differences (173) 337

E) Total change in cash and cash equivalents 1,324 650F) Cash and cash equivalents at end of period 7,741 6,417

of which: Cash and cash equivalents included as Assets held for sale 5 –G) Cash and cash equivalents at end of period as reported in Consolidated financial statements 7,736 6,417

(a) In 2005 this included, amongst other items, the unusual financial income of 858 million euros arising from the extinguishment of the Mandatory Convertible Facility.(b) The cash flows for the two periods generated by the sale of vehicles with a buy-back commitment, net of the amount already included in the net result, are included in operating activities

for the period, in a single item which includes the change in working capital, capital expenditures, depreciation, gains and losses and proceeds from sales at the end of the contract term,relating to assets included in Property, plant and equipment.

(c) The item Other changes includes for an amount of approximately 3 billion euros the reimbursement of loans extended by the Group’s centralised cash management to the financial servicescompanies of Fiat Auto transferred to the FAFS joint venture. In 2005, this item included approximately 2 billion euros for the reimbursement of loans extended by the Group’s centralisedcash management to the financial services companies sold by Iveco, and 500 million euros as part of the effects of the unwinding of the joint venture with General Motors.

(d) In 2005, this item was net of the repayment of the Mandatory Convertible Facility of 3 billion euros and of the debt of approximately 1.8 billion euros connected with the ItalenergiaBis operation, as neither of these gave rise to cash flows.


Consolidated Statement of Cash Flows(in millions of euros) Note At December 31, 2006 At December 31, 2005

LIABILITIESStockholders’ equity: (25) 10,036 9,413- Stockholders’ equity of the Group 9,362 8,681- Minority interest 674 732Provisions: 8,611 8,698- Employee benefits (26) 3,761 3,950- Other provisions (27) 4,850 4,748Debt: (28) 20,188 25,761- Asset-backed financing 8,344 10,729- Other debt 11,844 15,032Other financial liabilities (22) 105 189Trade payables (29) 12,603 11,777Other payables: (30) 5,019 4,821- Current tax payables 311 388- Others 4,708 4,433Deferred tax liabilities (11) 263 405Accrued expenses and deferred income (31) 1,169 1,280Liabilities held for sale (24) 309 110TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 58,303 62,454- Total stockholders’ equity and liabilities adjusted for asset-backed financing transactions 49,959 51,725


Consolidated Balance Sheet (continued)


Gains (losses) recognised directly in the cash flow hedge reserve 109 (16)Gains (losses) recognised directly in reserve for fair value measurement of available-for-sale financial assets 46 61Exchange gains (losses) on the translation of foreign operations (551) 921Gains (losses) recognised directly in equity (396) 966Transfers from cash flow hedge reserve (6) (44)Transfers from reserve for fair value measurement of available-for-sale financial assets (12) –Transfers from reserve for the translation of foreign operations (1) –Net result 1,151 1,420Recognised income (expense) 736 2,342

Attributable to:Equity holders of the parent 680 2,215Minority interests 56 127


Consolidated Statement of Recognised Income and Expense

Income (expenses)recognised

Capital Treasury Capital Earning directly Minority(in millions of euros) stock stock reserves reserves in equity interest Total

Balances at January 1, 2005 4,918 (26) – (615) 27 624 4,928Capital increase from extinguishment of Mandatory Convertible Facility 1,459 – 682 – – – 2,141Dividends – – – – – (29) (29)Changes in reserve for share based payments – – – 12 – – 12Net changes in Income (expenses) recognised directly in equity – – – – 884 38 922Other changes – (2) – 11 – 10 19Net result – – – 1,331 – 89 1,420Balances at December 31, 2005 6,377 (28) 682 739 911 732 9,413Capital increase – – – – – 16 16Dividends – – – – – (23) (23)Changes in reserve for share based payments – – – 11 – – 11Net changes in Income (expenses) recognised directly in equity – – – – (385) (30) (415)Other changes – 4 – (14) – (107) (117)Net result – – – 1,065 – 86 1,151Balances at December 31, 2006 6,377 (24) 682 1,801 526 674 10,036


Statement of Changes in Stockholders’ Equity

of which of whichRelated Relatedparties parties

(in millions of euros) Note 2006 (Note 35) 2005 (Note 35)

Net revenues (1) 51,832 2,189 46,544 1,870Cost of sales (2) 43,888 3,051 39,624 2,201Selling, general and administrative costs (3) 4,697 3 4,513 4Research and development costs (4) 1,401 – 1,364 –Other income (expenses) (5) 105 – (43) –Trading profit 1,951 1,000Gains (losses) on the disposal of investments (6) 607 – 905 –Restructuring costs (7) 450 – 502 –Other unusual income (expenses) (8) (47) – 812 –Operating result 2,061 2,215Financial income (expenses) (9) (576) – (843) –Unusual financial income (9) – – 858 –Result from investments: (10) 156 – 34 –- Net result of investees accounted for using the equity method 125 – 115 –- Other income (expenses) from investments 31 – (81) –Result before taxes 1,641 2,264Income taxes (11) 490 – 844 –Result from continuing operations 1,151 1,420Result from discontinued operations – – – –Net result 1,151 1,420

Attributable to:Equity holder of the parent 1,065 1,331Minority interests 86 89

Consolidated Income Statement pursuant to Consob Resolution No. 15519 of July 27, 2006

Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes 93

Format of the financial statementsThe Fiat Group presents an income statement using aclassification based on the function of expenses within theGroup (otherwise known as the “cost of sales” method), ratherthan based on their nature, as this is believed to provideinformation that is more relevant. The format selected is thatused for managing the business and for management reportingpurposes and is consistent with international practice in theautomotive sector.

In an income statement in which the classification of expensesis based on their function, the result from trading operationsis reported specifically as part of the Operating result andseparate from the income and expense resulting from the non-recurring operations of the business, such as gains andlosses on the sale of investments, restructuring costs and anyother unusual income or expense that are not considered partof normal trading operations. By doing this, it is believed thatthe Group’s actual performance from normal tradingoperations may be measured in a better way, while disclosingspecific details of unusual income and expenses.

The definition of unusual income and expenses adoptedby the Group differs from that provided in the ConsobCommunication of July 28, 2006, under which unusual andabnormal transactions are those which, because of theirsignificance or importance, the nature of the parties involved,the object of the transaction, the methods of determining thetransfer price or the timing of the event (close to the year end),may give rise to doubts regarding the accuracy/completenessof the information in the financial statements, conflicts ofinterest, the safeguarding of an entity’s assets or the protectionof minority interests.

For the balance sheet, a mixed format has been selectedto present current and non-current assets and liabilities, aspermitted by IAS 1. In more detail, both companies carryingout industrial activities and those carrying out financialactivities are consolidated in the Group’s financial statements,including an entity performing banking activities (disposedof in 2006 as described below). The investment portfolios offinancial services companies are included in current assets,as the investments will be realised in their normal operatingcycle. Financial services companies, though, obtain funds only

Principal activitiesFiat S.p.A. is a corporation organised under the laws of theRepublic of Italy. Fiat S.p.A. and its subsidiaries (the “Group”)operate in more than 190 countries. The Group is engagedprincipally in the manufacture and sale of automobiles,agricultural and construction equipment and commercialvehicles. It also manufactures other products and systems,principally automotive-related components, metallurgicalproducts and production systems. In addition, it is involvedin certain other sectors, including publishing andcommunications and service operations, which representa small portion of its activities. The head office of the Groupis located in Turin, Italy.

The consolidated financial statements are presented in euros,the Group’s functional currency.

Significant accounting policies

Basis of preparation The 2006 consolidated financial statements have beenprepared in accordance with the International FinancialReporting Standards (the “IFRS”) issued by the InternationalAccounting Standards Board (“IASB”) and adopted by theEuropean Union. The designation “IFRS” also includes allvalid International Accounting Standards (“IAS”), as well asall interpretations of the International Financial ReportingInterpretations Committee (“IFRIC”), formerly the StandingInterpretations Committee (“SIC”).

The Fiat Group adopted IFRS on January 1, 2005 whenEuropean Union Regulation No. 1606 of July 19, 2002 cameinto effect. The information required by IFRS 1 – First-timeAdoption of International Financial Reporting Standards onthe effects of transition to IFRS was included in the Appendixto the Consolidated Financial Statements at December 31,2005, to which reference should be made.

The financial statements are prepared under the historical costconvention, modified as required for the valuation of certainfinancial instruments.

of which of whichRelated Related

At December parties At December parties(in millions of euros) Note 31, 2006 (Note 35) 31, 2005 (Note 35)

ASSETSIntangible assets (13) 6,421 – 5,943 –Property, plant and equipment (14) 10,540 – 11,006 –Investment property (15) 19 – 26 –Investments and other financial assets: (16) 2,280 58 2,333 79- Investments accounted for using the equity method 1,719 – 1,762 –- Other investments and financial assets 561 58 571 79Leased assets (17) 247 – 1,254 –Defined benefit plan assets (26) 11 – – –Deferred tax assets (11) 1,860 – 2,104 –Total Non-current assets 21,378 22,666Inventories (18) 8,447 24 7,881 38Trade receivables (19) 4,944 377 4,969 203Receivables from financing activities (19) 11,743 191 15,973 73Other receivables (19) 2,839 145 3,084 34Accrued income and prepaid expenses (20) 247 – 272 –Current financial assets: 637 – 1,041 –- Current investments 31 – 31 –- Current securities (21) 224 – 556 –- Other financial assets (22) 382 – 454 –Cash and cash equivalents (23) 7,736 – 6,417 2Total Current assets 36,593 39,637Assets held for sale (24) 332 – 151 –TOTAL ASSETS 58,303 62,454

LIABILITIESStockholders’ equity: (25) 10,036 – 9,413 –- Stockholders’ equity of the Group 9,362 – 8,681 –- Minority interest 674 – 732 –Provisions: 8,611 – 8,698 –- Employee benefits (26) 3,761 – 3,950 –- Other provisions (27) 4,850 – 4,748 –Debt: (28) 20,188 734 25,761 365- Asset-backed financing 8,344 396 10,729 212- Other debt 11,844 338 15,032 153Other financial liabilities (22) 105 – 189 –Trade payables (29) 12,603 1,005 11,777 621Other payables (30) 5,019 45 4,821 41Deferred tax liabilities (11) 263 – 405 –Accrued expenses and deferred income (31) 1,169 – 1,280 –Liabilities held for sale (24) 309 – 110 –TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 58,303 62,454

Consolidated Balance Sheet pursuant to Consob Resolution No. 15519 of July 27, 2006


Notes to the Consolidated Financial Statements


Dividends received from these investments are includedin Other income (expenses) from investments.

Transactions eliminated on consolidationAll significant intragroup balances and transactions andany unrealised gains and losses arising from intragrouptransactions are eliminated in preparing the consolidatedfinancial statements. Unrealised gains and losses arising fromtransactions with associates and jointly controlled entities areeliminated to the extent of the Group’s interest in thoseentities.

Foreign currency transactionsTransactions in foreign currencies are recorded at theforeign exchange rate prevailing at the date of the transaction.Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date are translated at theexchange rate prevailing at that date. Exchange differencesarising on the settlement of monetary items or on reportingmonetary items at rates different from those at which theywere initially recorded during the period or in previousfinancial statements, are recognised in the income statement.

Consolidation of foreign entitiesAll assets and liabilities of foreign consolidated companieswith a functional currency other than the Euro are translatedusing the exchange rates in effect at the balance sheet date.Income and expenses are translated at the average exchangerate for the period. Translation differences resulting from theapplication of this method are classified as equity until thedisposal of the investment. Average rates of exchange are usedto translate the cash flows of foreign subsidiaries in preparingthe consolidated statement of cash flows.

Goodwill and fair value adjustments arising on the acquisitionof a foreign entity are recorded in the relevant functionalcurrency of the foreign entity and are translated using theperiod end exchange rate.

In the context of IFRS First-time Adoption, the cumulativetranslation difference arising from the consolidation of foreignoperations was set at nil, as permitted by IFRS 1; gains orlosses on subsequent disposal of any foreign operation only

partially from the market: the remaining are obtained from FiatS.p.A. through the Group’s treasury companies (included inindustrial companies), which lend funds both to industrialGroup companies and to financial services companies as theneed arises. This financial service structure within the Groupmeans that any attempt to separate current and non-currentdebt in the consolidated balance sheet cannot be meaningful.Suitable disclosure on the due dates of liabilities is moreoverprovided in the notes.

The Statement of Cash Flows is presented using the indirectmethod.

In connection with the requirements of the Consob ResolutionNo. 15519 of July 27, 2006 as to the format of the financialstatements, specific supplementary Income Statement andBalance Sheet formats have been added for related partytransactions so as not to compromise an overall readingof the statements.

Basis of consolidation

SubsidiariesSubsidiaries are enterprises controlled by the Group, asdefined in IAS 27 – Consolidated and Separate FinancialStatements. Control exists when the Group has the power,directly or indirectly, to govern the financial and operatingpolicies of an enterprise so as to obtain benefits from itsactivities. The financial statements of subsidiaries are includedin the consolidated financial statements from the date thatcontrol commences until the date that control ceases. Theequity and net result attributable to minority stockholders’interests are shown separately in the consolidated balancesheet and income statement, respectively. When losses in aconsolidated subsidiary pertaining to the minority exceedthe minority interest in the subsidiary’s equity, the excessis charged against the Group’s interest, unless the minoritystockholders have a binding obligation to reimburse the lossesand are able to make an additional investment to cover thelosses, in which case the excess is recorded as an asset in theconsolidated financial statements. If no such obligation exists,should profits be realised in the future, the minority interests’share of those profits is attributed to the Group, up to the


amount necessary to recover the losses previously absorbedby the Group.

Subsidiaries that are either dormant or generate a negligiblevolume of business, are not consolidated. Their impact on theGroup’s assets, liabilities, financial position and earnings isimmaterial.

Jointly controlled entitiesJointly controlled entities are enterprises over whose activitiesthe Group has joint control, as defined in IAS 31 – Interests inJoint Ventures. The consolidated financial statements includethe Group’s share of the earnings of jointly controlled entitiesusing the equity method, from the date that joint controlcommences until the date that joint control ceases.

AssociatesAssociates are enterprises over which the Group hassignificant influence, but no control or joint control, overthe financial and operating policies, as defined in IAS 28– Investments in Associates. The consolidated financialstatements include the Group’s share of the earnings ofassociates using the equity method, from the date thatsignificant influence commences until the date that significantinfluence ceases. When the Group’s share of losses of anassociate, if any, exceeds the carrying amount of the associatein the Group’s balance sheet, the carrying amount is reducedto nil and recognition of further losses is discontinued exceptto the extent that the Group has incurred obligations in respectof the associate.

Investments in other companiesInvestments in other companies that are available-for-salefinancial assets are measured at fair value, when this can bereliably determined. Gains or losses arising from changes infair value are recognised directly in equity until the assets aresold or are impaired, when the cumulative gains and lossespreviously recognised in equity are recognised in the incomestatement of the period.

Investments in other companies for which fair value isnot available are stated at cost less any impairment losses.

include accumulated translation differences arising afterJanuary 1, 2004.

Intangible assets

GoodwillIn the case of acquisitions of businesses, the acquired identifiableassets, liabilities and contingent liabilities are recorded at fairvalue at the date of acquisition. Any excess of the cost of thebusiness combination over the Group’s interest in the fair valueof those assets and liabilities is classified as goodwill andrecorded in the financial statement as an intangible asset. Ifthis difference is negative (negative goodwill), it is recognisedin the income statement at the time of acquisition.

In the absence of a specific Standard or Interpretation onthe matter, when the Group acquires a minority interest incontrolled companies the excess of the acquisition cost overthe carrying value of the assets and liabilities acquired isrecognised as goodwill (the “Parent entity extension method”).

Goodwill is not amortised, but is tested for impairmentannually or more frequently if events or changes incircumstances indicate that it might be impaired. After initialrecognition, goodwill is measured at cost less any accumulatedimpairment losses.

On disposal of part or whole of a business which waspreviously acquired and which gave rise to the recognitionof goodwill, the remaining amount of the related goodwill isincluded in the determination of the gain or loss on disposal.

In the context of IFRS First-time Adoption, the Group electednot to apply IFRS 3 – Business Combinations retrospectivelyto the business combinations that occurred before January 1,2004; as a consequence, goodwill arising on acquisitionsbefore the date of transition to IFRS has been retained at theprevious Italian GAAP amounts, subject to impairment testingat that date.

Development costsDevelopment costs for vehicle project production (cars, trucks,buses, agricultural and construction equipment, related


Depreciation rates

Buildings 2% - 10%Plant and machinery 8% - 30%Industrial and commercial equipment 15% - 25%Other assets 10% - 33%

Land is not depreciated.

Leased assetsLeased assets include vehicles leased to retail customersby the Group’s leasing companies under operating leaseagreements. They are stated at cost and depreciated at annualrates of between 15% and 25%.

Investment propertyReal estate and buildings held in order to obtain rental incomeare carried at cost less accumulated depreciation (charged atannual rates of between 2.5% to 5%) and impairment losses.

Impairment of assetsThe Group reviews, at least annually, the recoverability of thecarrying amount of intangible assets (including capitaliseddevelopment costs) and tangible assets, in order to determinewhether there is any indication that those assets have sufferedan impairment loss. If indications of impairment are present,the carrying amount of the asset is reduced to its recoverableamount. An intangible asset with an indefinite useful life istested for impairment annually or more frequently, wheneverthere is an indication that the asset may be impaired.

Where it is not possible to estimate the recoverable amountof an individual asset, the Group estimates the recoverableamount of the cash-generating unit to which the asset belongs.

The recoverable amount of an asset is the higher of fair valueless disposal costs and its value in use. In assessing its value inuse, the pre-tax estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and therisks specific to the asset. An impairment loss is recognised

components, engines, and production systems) are recognisedas an asset if and only if all of the following conditions aremet: the development costs can be measured reliably and thetechnical feasibility of the product, volumes and pricingsupport the view that the development expenditure willgenerate future economic benefits. Capitalised developmentcosts comprise only expenditures that can be attributeddirectly to the development process.

Capitalised development costs are amortised on a systematicbasis from the start of production of the related product overthe product‘s estimated life, as follows:

N° of years

Cars 4 - 5Trucks and buses 8Agricultural and construction equipment 5Engines 8 - 10Components and Production Systems 3 - 5

All other development costs are expensed as incurred.

Intangible assets with indefinite useful livesIntangible assets with indefinite useful lives consist principallyof acquired trademarks which have no legal, regulatory,contractual, competitive, economic, or other factors that limitstheir useful lives. Intangible assets with indefinite useful livesare not amortised, but are tested for impairment annually ormore frequently whenever there is an indication that the assetmay be impaired.

Other intangible assetsOther purchased and internally-generated intangible assetsare recognised as assets in accordance with IAS 38 – IntangibleAssets, where it is probable that the use of the asset willgenerate future economic benefits and where the costs ofthe asset can be determined reliably.

Such assets are measured at purchase or manufacturing costand amortised on a straight-line basis over their estimateduseful lives, if these assets have finite useful lives.


Other intangible assets acquired as part of an acquisitionof a business are capitalised separately from goodwill if theirfair value can be measured reliably.

Property, plant and equipment

CostProperty, plant and equipment are stated at acquisitionor production cost and are not revalued.

Subsequent expenditures and the cost of replacing parts of anasset are capitalised only if they increase the future economicbenefits embodied in that asset. All other expenditures areexpensed as incurred. When such replacement costs arecapitalised, the carrying amount of the parts that are replacedis recognised in the income statement.

Property, plant and equipment also include vehicles sold witha buy-back commitment, which are recognised according to themethod described in the paragraph Revenue recognition if thebuy-back agreement originates from the Trucks andCommercial Vehicles Sutor.

Assets held under finance leases, which provide the Groupwith substantially all the risks and rewards of ownership, arerecognised as assets of the Group at their fair value or, iflower, at the present value of the minimum lease payments.The corresponding liability to the lessor is included in thefinancial statement as a debt. The assets are depreciated bythe method and at the rates indicated below.

Leases where the lessor retains substantially all the risks andrewards of ownership of the assets are classified as operatingleases. Operating lease expenditures are expensed on astraight-line basis over the lease terms.

DepreciationDepreciation is calculated on a straight-line basis over theestimated useful life of the assets as follows:

when the recoverable amount is lower than the carrying amount.Where an impairment loss on assets other than goodwillsubsequently no longer exists or has decreased the carryingamount of the asset or cash-generating unit is increased to therevised estimate of its recoverable amount, but not in excessof the carrying amount that would have been recorded had noimpairment loss been recognised. A reversal of an impairmentloss is recognised in the income statement immediately.

Financial instruments

PresentationFinancial instruments held by the Group are presented in thefinancial statements as described in the following paragraphs.

Investments and other non-current financial assets compriseinvestments in non-consolidated companies and other non-current financial assets (held-to-maturity securities, non-current loans and receivables and other non-current available-for-sale financial assets).

Current financial assets include trade receivables, receivablesfrom financing activities (retail financing, dealer financing,lease financing and other current loans to third parties),current securities, and other current financial assets (whichinclude derivative financial instruments stated at fair valueas assets), as well as cash and cash equivalents.

In particular, Cash and cash equivalents include cash at banks,units in liquidity funds and other money market securities thatare readily convertible into cash and are subject to aninsignificant risk of changes in value. Current securities includeshort-term or marketable securities which represent temporaryinvestments of available funds and do not satisfy therequirements for being classified as cash equivalents; currentsecurities include both available-for-sale and held for tradingsecurities.

Financial liabilities refer to debt, which includes asset-backedfinancing, and other financial liabilities (which includederivative financial instruments stated at fair value asliabilities), trade payables and other payables.


n Cash flow hedge – Where a derivative financial instrumentis designated as a hedge of the exposure to variability in futurecash flows of a recognised asset or liability or a highlyprobable forecasted transaction and could affect incomestatement, the effective portion of any gain or loss on thederivative financial instrument is recognised directly in equity.The cumulative gain or loss is removed from equity andrecognised in the income statement at the same time as theeconomic effect arising from the hedged item affects income.The gain or loss associated with a hedge or part of a hedgethat has become ineffective is recognised in the incomestatement immediately. When a hedging instrument or hedgerelationship is terminated but the hedged transaction is stillexpected to occur, the cumulative gain or loss realised to thepoint of termination remains in stockholders’ equity and isrecognised in the income statement at the same time as therelated transaction occurs. If the hedged transaction is nolonger probable, the cumulative unrealised gain or loss heldin stockholders’ equity is recognised in the income statementimmediately.

If hedge accounting cannot be applied, the gains or lossesfrom the fair value measurement of derivative financialinstruments are recognised immediately in the incomestatement.

Sales of receivablesThe Fiat Group sells a significant part of its financial, tradeand tax receivables through either securitisation programsor factoring transactions.

A securitisation transaction entails the sale of a portfolio ofreceivables to a securitisation vehicle. This special purposeentity finances the purchase of the receivables by issuingasset-backed securities (i.e. securities whose repayment andinterest flow depend upon the cash flow generated by theportfolio). Asset-backed securities are divided into classesaccording to their degree of seniority and rating: the mostsenior classes are placed with investors on the market; thejunior class, whose repayment is subordinated to the seniorclasses, is normally subscribed for by the seller. The residualinterest in the receivables retained by the seller is therefore

MeasurementInvestments in unconsolidated companies classified as non-current financial assets are accounted for as describedin the section Basis of consolidation.

Non-current financial assets other than investments, as wellas current financial assets and financial liabilities, areaccounted for in accordance with IAS 39 – FinancialInstruments: Recognition and Measurement.

Current financial assets and held-to-maturity securities arerecognised on the basis of the settlement date and, on initialrecognition, are measured at acquisition cost, includingtransaction costs.

Subsequent to initial recognition, available-for-sale and heldfor trading financial assets are measured at fair value. Whenmarket prices are not available, the fair value of available-for-sale financial assets is measured using appropriate valuationtechniques e.g. discounted cash flow analysis based on marketinformation available at the balance sheet date.

Gains and losses on available-for-sale financial assets arerecognised directly in equity until the financial asset isdisposed or is determined to be impaired, at which timethe cumulative gains or losses, including that previouslyrecognised in equity, are included in the income statementfor the period. Gains and losses arising from changes in fairvalue of held for trading financial instruments are includedin the income statement for the period.

Loans and receivables which are not held by the Group fortrading (originated loans and receivables), held-to-maturitysecurities and all financial assets for which published pricequotations in an active market are not available and whosefair value cannot be determined reliably, are measured, tothe extent that they have a fixed term, at amortised cost, usingthe effective interest method. When the financial assets do nothave a fixed term, they are measured at acquisition cost.Receivables with maturities of over one year which bear nointerest or an interest rate significantly lower than market ratesare discounted using market rates.


Assessments are made regularly as to whether there is anyobjective evidence that a financial asset or group of assetsmay be impaired. If any such evidence exists, an impairmentloss is included in the income statement for the period.

Except for derivative instruments, financial liabilities aremeasured at amortised cost using the effective interestmethod. Financial liabilities hedged by derivative instrumentsare measured in accordance with hedge accounting principlesapplicable to fair value hedges: gains and losses arising fromremeasurement at fair value, due to changes in relevanthedged risk, are recognised in the income statement and areoffset by the effective portion of the loss or gain arising fromremeasurement at fair value of the hedging instrument.

Derivative financial instrumentsDerivative financial instruments are only used for hedgingpurposes, in order to reduce currency, interest rate and marketprice risks. In accordance with IAS 39, derivative financialinstruments qualify for hedge accounting only when at theinception of the hedge there is formal designation anddocumentation of the hedging relationship, the hedge isexpected to be highly effective, its effectiveness can be reliablymeasured and it is highly effective throughout the financialreporting periods for which the hedge is designated.

All derivative financial instruments are measured inaccordance with IAS 39 at fair value.

When derivative financial instruments qualify for hedgeaccounting, the following accounting treatment applies:

n Fair value hedge – Where a derivative financial instrumentis designated as a hedge of the exposure to changes in fairvalue of a recognised asset or liability that is attributable toa particular risk and could affect the income statement, thegain or loss from remeasuring the hedging instrument at fairvalue is recognised in the income statement. The gain or losson the hedged item attributable to the hedged risk adjusts thecarrying amount of the hedged item and is recognised in theincome statement.

limited to the junior securities it has subscribed for. Inaccordance with SIC-12 – Consolidation – Special PurposeEntities (SPE), all securitisation vehicles are included in thescope of consolidation, because the subscription of the juniorasset-backed securities by the seller entails its control insubstance over the SPE.

Furthermore, factoring transactions may be with or withoutrecourse to the seller; certain factoring agreements withoutrecourse include deferred purchase price clauses (i.e. thepayment of a minority portion of the purchase price isconditional upon the full collection of the receivables), requirea first loss guarantee of the seller up to a limited amount orimply a continuing significant exposure to the receivablescash flow. These kinds of transactions do not meet IAS 39requirements for assets derecognition, since the risksand rewards have not been substantially transferred.

Consequently, all receivables sold through both securitisationand factoring transactions which do not meet IAS 39derecognition requirements are recognised as such in theGroup financial statements even though they have been legallysold; a corresponding financial liability is recorded in theconsolidated balance sheet as “Asset-backed financing”.Gains and losses relating to the sale of such assets are notrecognised until the assets are removed from the Groupbalance sheet.

InventoryInventories of raw materials, semi finished productsand finished goods are stated at the lower of cost and netrealisable value, cost being determined on a first in-first-out(FIFO) basis. The measurement of inventories includes thedirect costs of materials, labour and indirect costs (variableand fixed). Provision is made for obsolete and slow-movingraw materials, finished goods, spare parts and other suppliesbased on their expected future use and realisable value. Netrealisable value is the estimated selling price in the ordinarycourse of business less the estimated costs of completionand the estimated costs for sale and distribution.


2002 and not yet vested at January 1, 2005, the effective dateof the Standard. Detailed information is provided in respect ofall stock options granted on or prior to November 7, 2002.

ProvisionsThe Group records provisions when it has an obligation,legal or constructive, to a third party, when it is probable thatan outflow of Group resources will be required to satisfy theobligation and when a reliable estimate of the amount canbe made.

Changes in estimates are reflected in the income statementin the period in which the change occurs.

Treasury sharesTreasury shares are presented as a deduction from equity.The original cost of treasury shares and the proceeds of anysubsequent sale are presented as movements in equity.

Revenue recognitionRevenue is recognised if it is probable that the economicbenefits associated with the transaction will flow to the Groupand the revenue can be measured reliably. Revenues are statednet of discounts, allowances, settlement discounts and rebates,as well as costs for sales incentive programs, determined onthe basis of historical costs, country by country, and chargedagainst profit for the period in which the corresponding salesare recognised. The Group’s incentive programs include thegranting of retail financing at significant discount to marketinterest rates. The corresponding cost is recognised at thetime of the initial sale.

Revenues from the sale of products are recognised when therisks and rewards of ownership of the goods are transferredto the customer, the sales price is agreed or determinable andreceipt of payment can be assumed: this corresponds generallyto the date when the vehicles are made available to non-groupdealers, or the delivery date in the case of direct sales. Newvehicle sales with a buy-back commitment are not recognisedat the time of delivery but are accounted for as operatingleases when it is probable that the vehicle will be bought back.

The measurement of work in progress is based on the stage ofcompletion. These items are presented net of progress billingsreceived from customers. Any losses on such contracts arefully recorded in the income statement when they becomeknown.

Assets held for saleAssets held for sale include non-current assets (or assetsincluded in disposal groups) whose carrying amount will berecovered principally through a sale transaction rather thanthrough continuing use. Assets held for sale are measured atthe lower of their carrying amount and fair value less disposalcosts.

Employee benefits

Pension plansEmployees of the Group participate in several defined benefitand/or defined contribution pension plans in accordance withlocal conditions and practices in the countries in which theGroup operates. Defined benefit pension plans are based onthe employees’ years of service and the remuneration earnedby the employee during a pre-determined period.

The Group’s obligation to fund defined benefit pension plansand the annual cost recognised in the income statement isdetermined on an actuarial basis using the projected unit creditmethod. The portion of net cumulative actuarial gains andlosses which exceeds the greater of 10% of the present valueof the defined benefit obligation and 10% of the fair value ofplan assets at the end of the previous year is amortised overthe average remaining service lives of the employees (the“corridor approach”). In the context of IFRS First-timeAdoption, the Group elected to recognise all cumulativeactuarial gains and losses that existed at January 1, 2004,even though it has decided to use the corridor approach forsubsequent actuarial gains and losses. Past service costs arerecognised on a straight-line basis over the average periodremaining until the benefits become vested. The expenserelated to the reversal of discounting pension obligations fordefined benefit plans are reported separately as part of the


Group’s financial expense. All other costs relating toallocations to pension provisions are allocated to costsby function in the income statement.

The post-employment benefit obligation recognised in thebalance sheet represents the present value of the definedbenefit obligation as adjusted for unrecognised actuarial gainsand losses, arising from the application of the corridor methodand unrecognised past service cost, reduced by the fair valueof plan assets. Any net asset resulting from this calculation isrecognised at the lower of its amount and the total of anycumulative unrecognised net actuarial losses and past servicecost, and the present value of any economic benefits availablein the form of refunds from the plan or reductions in futurecontributions to the plan.

Payments to defined contribution plans are recognisedas an expense in the income statement as incurred.

Post-employment plans other than pensionsThe Group provides certain post-employment defined benefitschemes, mainly healthcare plans. The method of accountingand the frequency of valuations are similar to those used fordefined benefit pension plans.

The reserve for employee severance indemnities of Italiancompanies (“TFR”) is considered a defined benefit planand is accounted for accordingly.

Equity compensation plansThe Group provides additional benefits to certain membersof senior management and employees through equitycompensation plans (stock option plans). In accordancewith IFRS 2 – Share-based Payment, these plans representa component of recipient remuneration. The compensationexpense, corresponding to the fair value of the options atthe grant date, is recognised in the income statement on astraight-line basis over the period from the grant date to thevesting date, with the offsetting credit recognised directly inequity. Any subsequent changes to fair value do not have anyeffect on the initial measurement. In accordance with thetransitional provisions of IFRS 2, the Group applied theStandard to all stock options granted after November 7,

More specifically, vehicles sold with a buy-back commitmentare accounted for as assets in Inventory if the sale originatesfrom the Fiat Auto business (agreements with normally ashort-term buy-back commitment); and are accounted for inProperty, plant and equipment, if the sale originates from theCommercial Vehicles business (agreements with normally along-term buy-back commitment). The difference between thecarrying value (corresponding to the manufacturing cost) andthe estimated resale value (net of refurbishing costs) at the endof the buy-back period, is depreciated on a straight-line basisover the same period. The initial sale price received isrecognised as an advance payment (liability). The differencebetween the initial sale price and the buy-back price isrecognised as rental revenue on a straight-line basis overthe term of the operating lease.

Revenues from services and from construction contractsare recognised by reference to the stage of completion(the percentage of completion method).

Revenues also include lease rentals and interest incomefrom financial services companies.

Cost of salesCost of sales comprises the cost of manufacturing productsand the acquisition cost of purchased merchandise which hasbeen sold. It includes all directly attributable material andproduction costs and all production overheads. These includethe depreciation of property, plant and equipment and theamortisation of intangible assets relating to production andwrite-downs of inventories. Cost of sales also includes freightand insurance costs relating to deliveries to dealer agency feein the case of direct sales.

Cost of sales also includes provisions made to cover theestimated cost of product warranties at the time of sale todealer networks or to the end customer. Revenues from thesale of extended warranties and maintenance contracts arerecognised over the period during which the service isprovided.

Expenses which are directly attributable to the financialservices businesses, including the interest expense related tothe financing of financial services businesses as a whole and


recognised in the consolidated financial statements or thathave a significant risk of causing a material adjustment tothe carrying amounts of assets and liabilities within the nextfinancial year.

Allowance for doubtful accountsThe allowance for doubtful accounts reflects managementestimate of losses inherent in wholesale and retail creditportfolio. The Group reserves for the expected credit lossesbased on past experience with similar receivables, current andhistorical past due amounts, dealer termination rates, write-offsand collections, the careful monitoring of portfolio credit qualityand current and projected economic and market conditions.

Recoverability of non-current assets (including goodwill)Non-current assets include property, plant and equipment,investment property, intangible assets (including goodwill),investments and other financial assets. Management reviewsthe carrying value of non-current assets held and used and thatof assets to be disposed of when events and circumstanceswarrant such a review. Management performs this reviewusing estimates of future cash flows from the use or disposalof the asset and suitable discount rate in order to calculatepresent value. If the carrying amount of a non-current asset isconsidered impaired, the Group records an impairment chargefor the amount by which the carrying amount of the assetexceeds its estimated recoverable amount from use or disposaldetermined by reference to its most recent corporate plans.

Residual values of assets leased out under operatinglease arrangements or sold with a buy-backcommitmentThe Group reports assets rented or leased to customers underoperating leases as tangible assets. Furthermore, new vehicle“sales” with a buy-back commitment are not recognised assales at the time of delivery but are accounted for as operatingleases if it is probable that the vehicle will be bought back. TheGroup recognises income from such operating leases over theterm of the lease. Depreciation expense for assets subject tooperating leases is recognised on a straight-line basis over theterm of the lease in amounts necessary to reduce the cost ofthe assets to its estimated residual value at the end of thelease term. The estimated residual value of the leased assets is

charges for risk provisions and write-downs, are reportedin cost of sales.

Research and development costsThis item includes research costs, development costs noteligible for capitalisation and the amortisation of developmentcosts recognised as assets in accordance with IAS 38 (seeNotes 4 and 13).

Government grantsGovernment grants are recognised in the financial statementswhen there is reasonable assurance that the Group companyconcerned will comply with the conditions for receivingsuch grants and that the grants themselves will be received.Government grants are recognised as income over the periodsnecessary to match them with the related costs which they areintended to compensate.

TaxesIncome taxes include all taxes based upon the taxable profitsof the Group. Taxes on income are recognised in the incomestatement except to the extent that they relate to items directlycharged or credited to equity, in which case the related incometax effect is recognised in equity. Provisions for income taxesthat could arise on the distribution of a subsidiary’sundistributed profits are only made where there is a currentintention to distribute such profits. Other taxes not based onincome, such as property taxes and capital taxes, are includedin operating expenses. Deferred taxes are provided using thefull liability method. They are calculated on all temporarydifferences between the tax base of an asset or liability and thecarrying values in the consolidated financial statements, exceptfor those arising from non tax-deductible goodwill and forthose related to investments in subsidiaries where theirreversal will not take place in the foreseeable future. Deferredtax assets relating to the carry-forward of unused tax lossesand tax credits, as well as those arising from temporarydifferences, are recognised to the extent that it is probablethat future profits will be available against which they can beutilised. Current and deferred income tax assets and liabilities


are offset when the income taxes are levied by the sametaxation authority and where there is a legally enforceableright of offset. Deferred tax assets and liabilities are measuredat the substantively enacted tax rates in the respectivejurisdictions in which the Group operates that are expectedto apply to taxable income in the periods in which temporarydifferences will be reversed.

DividendsDividends payable are reported as a movement in equityin the period in which they are approved by stockholders.

Earnings per shareBasic earnings per share are calculated by dividing the Group’snet profit attributable to the various classes of shares by theweighted average number of shares outstanding during theyear. For diluted earnings per share, the weighted averagenumber of shares outstanding is adjusted assuming conversionof all dilutive potential shares. Group net result is alsoadjusted to reflect the net after-tax impact of conversion.

Use of estimatesThe preparation of financial statements and related disclosuresthat conform to IFRS requires management to makejudgements, estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the financialstatements. The estimates and associated assumptions arebased on historical experience and other factors that areconsidered to be relevant. Actual results could differ fromthose estimates. Estimates and assumptions are reviewedperiodically and the effects of any changes are recognisedin the period in which the estimate is revised if the revisionaffects only that period, or in the period of the revision andfuture periods if the revision affects both current and futureperiods.

The following are the critical judgements and the keyassumptions concerning the future, that management hasmade in the process of applying the Group accounting policiesand that have the most significant effect on the amounts

calculated at the lease inception date on the basis of publishedindustry information and historical experience.

Realisation of the residual values is dependent on the Group’sfuture ability to market the assets under the then-prevailingmarket conditions. The Group continually evaluates whetherevents and circumstances have occurred which impact theestimated residual values of the assets on operating leases.

Sales allowanceAt the later time of sale or the time an incentive is announcedto dealers, the Fiat Group records the estimated impact ofsales allowances in the form of dealer and customer incentivesas a reduction of revenue. There may be numerous types ofincentives available at any particular time. The determinationof sales allowances requires management estimates based ondifferent factors.

Product warrantiesThe Group makes provisions for estimated expenses related toproduct warranties at the time products are sold. Managementestablishes these estimates based on historical information onthe nature, frequency and average cost of warranty claims. TheGroup seeks to improve vehicle quality and minimise warrantyclaims, but it has also extended contractual warranty periodsfor certain classes of vehicles.

Pension and other post-retirement benefitsGroup companies sponsor pension and other post-retirementbenefits in various countries. In the US, the United Kingdom,Germany and Italy, the Group has major defined benefit plans.Management uses several statistical and judgmental factorsthat attempt to anticipate future events in calculating theexpense, the liability and the assets related to these plans.These factors include assumptions about the discount rate,expected return on plan assets, rate of future compensationincreases and health care cost trend rates. In addition, theGroup’s actuarial consultants also use subjective factors suchas withdrawal and mortality rates in making relevantestimates.

Realisation of deferred tax assets arising from taxloss carryforwardsAs of December 31, 2006, the Group had gross deferred taxassets arising from tax loss carryforwards of 5,701 million


cumulative amortisation recognised in accordance withIAS 18 - Revenue.

In limited cases the Fiat Group provides guarantees to thirdparties, mostly on behalf of associates and joint ventures inwhich the Group participates, receiving in exchange acommission for this service. No significant effects arose onapplying the amendment.

In August 2005, the IASB issued IFRS 7 – Financial Instruments:Disclosures and a complementary amendment to IAS 1 –Presentation of Financial Statements – Capital Disclosures.IFRS 7 requires disclosures about the significance of financialinstruments for an entity’s financial position and performance.These disclosures incorporate many of the requirementspreviously in IAS 32 – Financial Instruments: Disclosure andPresentation. IFRS 7 also requires information about the extentto which the entity is exposed to risks arising from financialinstruments, and a description of management’s objectives,policies and processes for managing those risks. Theamendment to IAS 1 introduces requirements for disclosuresabout an entity’s capital.

IFRS 7 and the amendment to IAS 1 are effective for annualperiods beginning on or after January 1, 2007. The Fiat Groupearly adopted IFRS 7 for the annual period beginning January1, 2005.

On November 2, 2006, the IFRIC issued an interpretation, theIFRIC 11 – IFRS 2 – Group and Treasury Share Transactions.This interpretation establishes that share based paymentarrangements in which an entity receives services asconsideration for its own equity instruments must beaccounted for as equity-settled. IFRIC Interpretation 11 iseffective as of January 1, 2008. The Group early adopted thisinterpretation as of January 1, 2006 and no significant effectsarose from this.

New accounting principlesOn March 3, 2006, the IFRIC issued interpretation IFRIC 9 –Reassessment of Embedded Derivatives, which requires anentity to assess whether an embedded derivative is requiredto be separated from the host contract and accounted for asa derivative when the entity first becomes a party to the

euros and valuation allowances against these assets of 4,551million euros. The corresponding totals at December 31, 2005were 5,011 million euros and 4,046 million euros, respectively.Management has recorded these valuation allowances toreduce deferred tax assets to the amount that it believes it isprobable will be recovered.

Contingent liabilitiesThe Group is the subject of legal proceedings and tax issuescovering a range of matters, which are pending in variousjurisdictions. Due to the uncertainty inherent in such matters,it is difficult to predict the final outcome of such matters. Thecases and claims against the Group often raise difficult andcomplex factual and legal issues, which are subject to manyuncertainties and complexities, including but not limited to thefacts and circumstances of each particular case and claim, thejurisdiction and the differences in applicable law. In the normalcourse of business management consults with legal counseland certain other experts on matter related to litigation andtaxes. The Group accrues a liability when it is determined thatan adverse outcome is probable and the amount of the losscan be reasonably estimated. In the event an adverse outcomeis possible or an estimate is not determinable, the matter isdisclosed.

Accounting principles adopted from January 1, 2006In December 2004 IFRIC released the interpretation IFRIC 4 –Determining whether an arrangement contains a Lease in orderto give guidance on determining whether arrangements that donot take the legal form of a lease should be accounted for inaccordance with IAS 17 – Leases. In particular, theinterpretation specifies that an arrangement contains a leaseif it depends on the use of a specific asset and conveys a rightto control the use of that asset. The Group adopted thisinterpretation as of January 1, 2006; no significant effectsarose from the adoption of this interpretation.

In April 2005, the IASB issued an amendment to IAS 39 –Financial Instruments: Recognition and Measurement topermit the foreign currency risk of a highly probableintragroup forecast transaction to qualify as the hedged itemin a cash flow hedge in consolidated financial statements –provided that the transaction is denominated in a currencyother than the functional currency of the entity entering into


that transaction and the foreign currency risk will affectconsolidated financial statements. The amendment alsospecifies that if the hedge of a forecast intragroup transactionqualifies for hedge accounting, any gain or loss that isrecognised directly in equity in accordance with the hedgeaccounting rules in IAS 39 must be reclassified into profit orloss in the same period or periods during which the foreigncurrency risk of the hedged transaction affects consolidatedincome statement.

In June 2005, the IASB issued an amendment to IAS 39 –Financial Instruments: Recognition and Measurement to restrictthe use of the option to designate any financial asset or anyfinancial liability to be measured at fair value through profitand loss (the fair value option). The revisions limit the use ofthe option to those financial instruments that meet certainconditions. Those conditions are that:

n the fair value option designation eliminates or significantlyreduces an accounting mismatch;

n a group of financial assets, financial liabilities, or both aremanaged and their performance is evaluated on a fair valuebasis in accordance with a documented risk management orinvestment strategy; and

n an instrument contains an embedded derivative that meetsparticular conditions.

The Group adopted these amendments to IAS 39 as of January1, 2006. This adoption had no material impact on theStockholders’ equity and net result for the period.

In August 2005, the IASB issued amended requirements forfinancial guarantee contracts, in the form of limitedamendments to IAS 39 and IFRS 4. The amendments requirethat issuers of financial guarantee contracts include theresulting liabilities in their balance sheet, measured as follows:

n initially at fair value;

n subsequently at the higher of (i) the best estimate of theexpenditure required to settle the present obligation at thebalance sheet date in accordance with IAS 37 - Provisions,Contingent Liabilities and Contingent Assets and (ii) theamount initially recognised less, where appropriate,

contract. Subsequent reassessment is prohibited unless thereis a change in the terms of the contract that significantlymodifies the cash flows that otherwise would be requiredunder the contract, in which case reassessment is required.This interpretation will become effective for the Group onJanuary 1, 2007 No significant impact is expected to ariseon its adoption.

On November 30, 2006, the IASB issued the IFRS 8 –Operating Segments that will become effective for the Groupon January 1, 2009 and which will replace IAS 14 – SegmentReporting from that date. The new standard requires theinformation provided in segment reporting to be based uponthe components of the entity that management uses to makedecisions about operational matters. The standard requiresthese operating segments to be identified on the basis ofinternal reports that are regularly reviewed by an entity’smanagement in order to allocate resources to the segmentand assess its performance. The Group is currently assessingany impact that the adoption of this new standard may haveon the financial statements.

The following standards and interpretations have also beenissued in 2006 but are not applicable to the Fiat Group:

n IFRIC 8 – Scope of IFRS 2 (effective from January 1, 2007);

n IFRIC 12 – Service Concession Arrangements (effective fromJanuary 1, 2008).

Risk management

Credit riskThe Group’s credit concentration risk differs in relation tothe activities carried out by the individual sectors and varioussales markets in which the Group operates; in all cases,however, the risk is mitigated by the large number ofcounterparties and customers. Considered from a global pointof view, however, there is a concentration of credit risk in tradereceivables and receivables from financing activities, inparticular dealer financing and finance leases in the European


Additional qualitative information on the financial risksto which the Group is exposed is provided in Note 34.

Scope of consolidationThe consolidated financial statements of the Group as ofDecember 31, 2006 include Fiat S.p.A. and 419 consolidatedsubsidiaries in which Fiat S.p.A., directly or indirectly, has amajority of the voting rights, over which it exercises control,or from which it is able to derive benefit by virtue of its powerto govern corporate financial and operating policies.

The total number of consolidated subsidiaries at December 31,2006 decreased by 38 compared with that at December 31, 2005.

Excluded from consolidation are 81 subsidiaries that are eitherdormant or generate a negligible volume of business: theirproportion of the Group’s assets, liabilities, financial positionand earnings is immaterial. In particular, 44 such subsidiariesare accounted for using the cost method; and represent 0.1percent of Group revenues, 0.0 percent of stockholders’ equityand 0.1 percent of total assets.

Interests in jointly controlled entities (64 companies, including37 entities of Fiat Auto Financial Services group) are accountedfor using the equity method, except for one investmentaccounted for using proportionate consolidation, althoughthe amounts involved in this case are not significant. Thecombined balances of the Group’s share in the principalbalance sheet items of joint ventures accounted for usingthe equity method are as follows:

(in millions of euros) At December 31, 2006 At December 31, 2005

Non-current assets 1,992 1,064

Current assets 8,777 1,413

Total assets 10,769 2,477

Debt 7,781 710

Other liabilities 1,687 1,062

There is a significant increase in these balances at December31, 2006 due to the inclusion at that date of the balances of theFiat Auto Financial Services group (the “FAFS” group), a jointventure created at the end of 2006 with Sofinco (belonging tothe Crédit Agricole group), as described further in the notes.

Union market for the Fiat Auto and Commercial VehiclesSectors, and in North America for the Agricultural andConstruction Equipment Sector.

Financial assets are recognised in the balance sheet netof write-downs for the risk that counterparties will be unableto fulfil their contractual obligations, determined on the basisof the available information as to the creditworthiness of thecustomer and historical data.

Liquidity riskThe Group is exposed to funding risk if there is difficulty inobtaining finance for operations at any given point in time.

The cash flows, funding requirements and liquidity of Groupcompanies are monitored on a centralised basis, under thecontrol of the Group Treasury. The aim of this centralisedsystem is to optimise the efficiency and effectiveness of themanagement of the Group’s capital resources

In order to minimise the cost of financing and to ensure thatfunding is obtainable, Group Treasury has the committed creditfacilities described in Note 28.

Interest rate risk and currency riskAs a multinational group that has operations throughout theworld, the Group is exposed to market risks from fluctuationsin foreign currency exchange and interest rates.

The exposure to foreign currency risk arises both in connectionwith the geographical distribution of the Group’s industrialactivities compared to the markets in which it sell products,and in relation to the use of external borrowing denominatedin foreign currencies.

The Group utilises external borrowing and the sale of financialreceivables as asset-backed securities through securitisationsto fund its industrial and financial activities. Changes ininterest rates could have the effect of either increasingor decreasing the Group’s net result.


The Group regularly assesses its exposure to interest rateand foreign currency risk through the use of derivativefinancial instruments in accordance with its established riskmanagement policies.

The Group’s policy permits derivatives to be used only formanaging the exposure to fluctuation in exchange and interestrates connected to monetary flows and assets and liabilities,and not for speculative purposes.

The Group utilises derivative financial instruments designatedas fair value hedges, mainly to hedge:

n the exchange rate risk on financial instruments denominatedin foreign currency;

n the interest rate risk on fixed rate loans and borrowings.

The instruments used for these hedges are mainly currencyswaps, forward contracts, interest rate swaps and combinedinterest rate and currency financial instruments.

The Group uses derivative financial instruments as cash flowhedges for the purpose of pre-determining:

n the exchange rate at which forecasted transactionsdenominated in foreign currencies will be accounted for;

n the interest paid on borrowings, both to match the fixedinterest received on loans (customer financing activity), and toachieve a pre-defined mix of floating versus fixed rate fundingstructured loans.

The exchange rate exposure on forecasted commercial flowsis hedged by currency swaps, forward contracts and currencyoptions. Interest rate exposures are usually hedged by interestrate swaps and, in limited cases, by forward rate agreements.

Counterparties to these agreements are major internationalfinancial institutions with high credit ratings.

Information on the fair value of derivative financial instrumentsheld at the balance sheet date is provided in Note 22.

This operation led to the derecognition of the assets andliabilities held by entities previously controlled by the FiatGroup and transferred to the joint venture as of December 28,2006. In particular, Non-current assets have increased mainlyas a consequence of the inclusion of the leased assets ofrenting companies belonging to FAFS, while Current assetshave increased as a consequence of the inclusion of thereceivables from the financing activities of the financialservices companies; the item Debt has increased significantlydue to the inclusion of the debt of those financial servicescompanies.

The following summary income statement excludes the resultsof the operations of the FAFS group, as the joint venture wasestablished at the end of 2006. Prior to the joint venture, onthis date, the entities were consolidated on a line-by-line basisfor companies still belonging to the Fiat Group, and whereaccounted for using the equity method for associatedcompanies belonging to the Fidis Retail Italia group. After thejoint venture was formed, all entities are accounted for usingthe equity method.

The combined balances of the Group’s share in the principalincome statement items of jointly controlled entities accountedfor using the equity method are as follows:


Net revenues 4,000 3,464Trading profit 110 59Operating result 93 59Result before taxes 87 56Net result 50 34

Twenty-nine associates are accounted for using the equitymethod, while 31 associates, that in aggregate are of minorimportance, and are stated at cost. The main aggregateamounts related to the Fiat Group interests in associatesare as follows:


Total assets 2,680 7,482Liabilities 2,167 6,432


Net revenues 1,145 1,280Net result 78 71


In addition, the Group entered certain agreements duringthe year that led to the need to reclassify the businessesconcerned as Assets and Liabilities held for sale. In particular:

n The Fiat Group and Norsk Hydro reached an agreement onDecember 6, 2006, for the sale of their interests in MeridianTechnologies Inc., 51% and 49% respectively, to a consortiumof investors headed by the Swiss holding company Estatia AG.The total value of the transaction, subject to usual priceadjustment conditions, is worth approximately 200 millionCanadian dollars. The transaction is subject to theauthorisations from authorities (received in 2007) and tothe closing of the financing to the purchaser from financialinstitutions.

n On December 14, 2006, Fiat Auto and Tata Motors reachedan agreement for the establishment of an industrial jointventure located at the Fiat plant at Ranjangaon, in India.

n Fiat has reached on December 15, 2006, an agreement withPirelli Re Facility management for the sale of the subsidiaryIngest Facility S.p.A. The sale will be carried out on the basisof a total value of approximately 50 million euros subject tousual price adjustments clauses and will be finalised afterantitrust authorisation have been received.

The following acquisitions were made in 2006 and mainlyrelate to the purchase of minority interests in companiesin which the Group already held control:

n On March 23, 2006, Fiat’s privileged “Series A” shares inCNH Global N.V. were converted into 100 million new ordinaryshares of CNH Global N.V.; as a result, the Group increased itsholding from 84% to 90%. This operation did not leadto significant effect in the Group’s consolidated financialstatements.

n During the second quarter of 2006 Ferrari S.p.A. increasedits capital stock by the issue of 104,000 new shares, for usein connection with its stock option plans. Fiat S.p.A.subsequently acquired 93,600 of these newly-issued shares,increasing its interest in the company to 56.4%.

n On September 29, 2006, Fiat exercised its call option on28.6% of the shares of Ferrari S.p.A., taking its holding from56.4% to 85%. Fiat has a call option on a further 5% of Ferrarishares, currently held by the Arab fund Mubadala DevelopmentCompany after the Fund had acquired 5,200 Ferrari newly-issued shares from Fiat. The call option may be exercisedbetween January 1, 2008 and July 31, 2008.

n On October 17, 2006, Ferrari acquired a 90% share in FerrariFinancial Services AG.

The following divestitures of subsidiaries were made in 2006:

n The procedure for the sale of the subsidiary Atlanet S.p.A.to the British Telecom group was for the most part finalisedin the first quarter of 2006 on receiving the approval of theGuarantor Authority for Competition and the Market; thetransaction was finally concluded with the sale of the Polishand Brazilian businesses in the second half of 2006.

n Fiat sold its investment in Sestrieres S.p.A. to Via LatteaS.p.A. on June 29, 2006.

n On August 30, 2006, Teksid S.p.A sold its holding in SociétéBretonne de Fonderie et Mecanique.


n On August 31, 2006, Fiat sold its holding in Banca Unionedi Credito (B.U.C.) to BSI (a company of the Generali Group).

n On November 10, 2006, the subsidiary Comau Pico soldits Autodie business to Mbtech Stuttgart.

n Finally, on December 28, 2006, Fiat Auto and Crédit Agricolecompleted the transaction for the creation of a 50/50 jointventure, Fiat Auto Financial Services (“FAFS”), which willhandle Fiat Auto’s main financing activities in Europe (retailauto financing, dealership financing, and long-term car rentaland fleet management). In particular:

– Synesis Finanziaria (a company held equally by Unicredito,Banca Intesa, Capitalia, and San Paolo-IMI) held 51% interestin Fidis Retail Italia (“FRI”), which was sold to Fiat Auto,upon exercise of its call option, for 479 million euros. FRI, acompany controlling the Fiat Auto European retail financingactivities, subsequently changed its corporate name to FiatAuto Financial Services S.p.A. (“FAFS”);

– FAFS acquired other Fiat Auto subsidiaries currently activein the European Fiat Auto dealer financing and rentingbusiness;

– Fiat Auto sold to Sofinco, the wholly owned consumer creditsubsidiary of Crédit Agricole, 50% of the capital stock ofFAFS for a total cash consideration of 940 million eurossubject to usual price adjustment clauses;

– Crédit Agricole/Sofinco refinanced FAFS for the entire debtwith the Fiat Group and part of their debt to third parties.

For the Fiat Group these transactions resulted in a capital gainof 463 million euros, an increase in cash of more than 3 billioneuros (including the repayment of intercompany loans) and areduction in net industrial debt by approximately 360 millioneuros.

The effect on the Group’s assets and liabilities of thementioned acquisitions and divestitures of businesses aredescribed in Note 36.

Other informationCertain reclassifications have been made to the balance sheetreported in the published consolidated financial statementsat December 31, 2005 in arriving at that presented in thesefinancial statements as comparative figures. Thesereclassifications have no effect on the net result orstockholder’s equity. In particular:

n Certain debt amounting to 519 million euros and previouslyclassified in the balance sheet at December 31, 2005 as Otherdebt has been reclassified to Asset-backed financing in thecomparative balance sheet presented in these financialstatements, as it substantially relates to the securitisationof receivables. This reclassification does not, however, alterthe total amount presented as Debt at that date.

n Following a detailed analysis of the composition of itsbalance sheet provisions, the Group has reclassified certainpension funds previously included as Other provisions. Thisresulted in a reclassification of a net liability balance of 31million euros at December 31, 2005, of which 133 million eurosrelates to the present value of the obligation and 102 millioneuros to the fair value of the plan assets (the correspondingfigures at January 1, 2005 were 120 million euros and 86million euros respectively).


5. Other income (expenses)This item consists of income arising from trading operations which is not attributable to the sale of goods and services(such as royalties and other income from licences and know-how), net of miscellaneous operating costs which cannot be allocatedto specific functional areas, such as post-employment benefits for retired former employees (health care service costs), indirecttaxes and duties, and accruals for various provisions.

The detail of Other income (expenses) is as follows:


Other incomeGains on disposal of Property, plant and equipment 95 166Amortisation of deferred government investment grants 68 64Government revenue grants 38 58Royalties and other income from licences and know-how 20 55Rental income 42 40Recovery of expenses and compensation for damages 64 145Release of excess provisions 130 177Prior period income 272 294Other income 256 362Total Other income 985 1,361

Other expensesIndirect taxes 112 106Losses on disposal of Property, plant and equipment 32 35Impairment of assets 7 29Post-employment benefits for retired former employees 5 63Charges for other provisions 282 533Prior period expenses 184 186Other expenses 258 452Total Other expenses 880 1,404

Other income (expenses) 105 (43)

In 2005, the item Release of excess provisions included an amount arising in the Agricultural and Construction Equipment Sectorfrom a structural reduction in period welfare costs in North America, resulting in the release to income of 83 million eurospreviously provided. The Sector released to income a further 25 million euros in 2006 for the same reason.

6. Gains (losses) on the disposal of investmentsThis item, amounting to 607 million euros 2006, includes the gains realised upon the creation of the FAFS joint-venture (463 millioneuros) as well as the gains on the sale of Banca Unione Credito - B.U.C. (80 million euros), Immobiliare Novoli S.p.A. (39 millioneuros), Machen Iveco Holding Sa, which held about 51% shareholding in Ashok Leyland Ltd (23 million euros), Atlanet S.p.A. (22million euros) and the residual interest in IPI S.p.A. (9 million euros). The item also includes an amount of 29 million euros for theexpected loss (mainly allocated to the goodwill impairment loss, as described in Note 13) on the disposal of Meridian TechnologiesInc.; this sale is today still subject to the closing of the financing to the purchaser from financial institutions.

Composition and principal changes

Income Statement

1. Net revenuesNet revenues can be analysed as follows:


Revenues from:- Sales of goods 46,105 41,013- Rendering of services 2,827 2,346- Contract revenues 917 1,285- Rents on operating leases 519 397- Rents on assets sold with a buy-back commitment 311 323- Interest income from customers and other financial income of financial services companies 1,077 1,088- Other 76 92Total Net revenues 51,832 46,544

2. Cost of salesCost of sales comprises the following:


Cost of sales attributable to the industrial business 42,991 38,898Interest cost and other financial charges from financial services companies 897 726Total Cost of sales 43,888 39,624

3. Selling, general and administrative costsSelling costs amount to 2,627 million euros in 2006 (2,533 million euros in 2005) and comprise mainly marketing, advertisingand sales personnel costs.

General and administrative costs amount to 2,070 million euros in 2006 (1,980 million euros in 2005) and comprise mainlyexpenses for administration which are not attributable to sales, production and research and development functions.

4. Research and development costsIn 2006, Research and development costs of 1,401 million euros (1,364 million euros in 2005) comprise all research anddevelopment costs not recognised as assets amounting to 785 million euros (902 million euros in 2005) and the amortisationof capitalised development costs of 616 million euros (462 million euros in 2005). During the period the Group incurred newexpenditure for capitalised development costs of 813 million euros (656 million euros in 2005).



of the platforms and the reallocation of production; costs of 71 million euros for an indemnity to Global Value S.p.A. for unwindingthe joint venture with IBM; 30 million euros from indemnities paid to settle contractual guarantees granted on the saleof businesses in previous years and other minor items.

9. Financial income (expenses) and unusual financial income

Financial income (expenses)In addition to the items included in the specific lines of the income statement, Net financial income (expenses) also includes theincome from financial services companies included in Net revenues for 1,077 million euros (1,088 million euros in 2005) and thecosts incurred by financial services companies included in Interest cost and other financial charges from financial servicescompanies included in Cost of sales for 897 million euros (726 million euros in 2005).

Reconciliation to the income statement is provided at the foot of the following table.


Financial income- Interest earned and other financial income 295 258

- Interest income from customers and other financial income of financial services companies 1,077 1,088

- Gains on disposal of securities 7 10

Total Financial income (a) 1,379 1,356of which:

- Financial income, excluding financial services companies 302 268

Interest and other financial expenses- Interest expense and other financial expenses 1,616 1,695

- Write-downs of financial assets 115 126

- Losses on disposal of securities 2 2

- Interest costs on employee benefits 166 146

Total Interest and other financial expenses (b) 1,899 1,969

Net income (expenses) from derivative financial instruments and exchange differences (c) 124 132of which of (b+c):

Interest and other financial expenses, effects resulting from derivative financial instruments

and exchange differences, excluding financial services companies 878 1,111

Net financial income (expenses) excluding financial services companies (a-b-c) (576) (843)

The majority of the balance of 905 million euros in 2005 consisted of the net gain of 878 million euros arising from the sale to EDFof the investment held by Fiat in Italenergia Bis S.p.A. In particular, as a consequence of the notification received from EDF of itsintention to withdraw its arbitration claim, Fiat sold its holding of 24.6% of the capital stock of Italenergia Bis S.p.A. to EDF onSeptember 9, 2005 at a price of 1,147 million euros. On the same date, the Citigroup loan granted in September 2002 for the sameamount was reimbursed, and the banks that had acquired 14% of Italenergia Bis from Fiat in 2002, signing simultaneousagreements for a series of put and call options, sold their stake to EDF, with the result that any possibility for Fiat to be required torepurchase the 14% holding was eliminated (a possibility that led to the derecognition in the IFRS financial statements of the saleof the 14% carried out in 2002 and the recognition of a liability of approximately 600 million euros to the banks who acquired thatholding). As a result of these transactions, Group net debt decreased by approximately 1.8 billion euros.

The 2005 balance also included a gain of 23 million euros on the disposal of Palazzo Grassi S.p.A.

7. Restructuring costsThe restructuring costs of 450 million euros in 2006 were incurred mainly by Comau (179 million euros), CNH (145 million euros),Fiat Powertrain Technologies (60 million euros), Magneti Marelli (16 million euros), and Business Solutions (12 million euros). Inthis respect it is recalled that an intense reshaping and restructuring process was started in Comau during the third quarter of 2006in response to the Sector’s negative performance and declining order backlog.

Restructuring costs in 2005 amounted to 502 million and were incurred by Fiat Auto for 162 million euros, mostly in relation to therestructuring of the Sector’s central organisations and certain foreign operations, as well as the activities of Fiat-GM Powertrain;by Iveco for 99 million euros, essentially due to a reorganisation process of the entire Sector and in particular of its staff structure;by CNH for 87 million euros, regarding the reorganisation in progress of its activities and the restructuring of certain of its foreignoperations; and by Comau for 46 million euros, Magneti Marelli for 33 million euros Business Solutions for 22 million euros; inaddition to this there were minor amounts pertaining to other Group Sectors.

8. Other unusual income (expenses)Other unusual income (expenses) in 2006 consists of net expenses of 47 million euros. Included in this item, amongst other things,is the impairment of goodwill of 26 million euros relating to certain of Comau’s European operations, which results from theredefinition and restructuring of the perimeters of that Sector’s operations, and expenses of 17 million euros arising from thereorganisation and streamlining of relationships with the Group’s suppliers.

Other unusual income (expenses) amounted to 812 million euros in 2005 and comprised the following items: the gain for thesettlement of the Master Agreement with General Motors for 1,134 million euros (net of related expenses); a gain of 117 millioneuros realised on the final disposal of the real estate properties that had been securitised in 1998; additional costs connected withthe process of reorganisation and streamlining of relationships with Group suppliers, initiated in 2004, and with Fiat Auto dealers,for a total of 187 million euros; costs of 141 million euros incurred by Fiat Auto, as a consequence of the rationalisation process



11. Income taxesIncome taxes consist of the following:


Current taxes:- IRAP 149 116- Other taxes 346 184Total Current taxes 495 300Deferred taxes for the period (61) 425Taxes relating to prior periods 56 119Total Income taxes 490 844

In 2006, the decrease in the charge for income taxes reflects:

n the reduced effect arising from the realisation of deferred tax assets;

n a decrease in the level of taxes relating to prior periods;

n an increase in current taxes arising from the increase in operating results.

Deferred tax income of 61 million euros (net expense of 425 million euros in 2005) is the net effect of the recognition of deferredtax during the year and the realisation of deferred tax assets recognised in prior years. Taxes relating to prior periods include thecost of finalising certain disputes with foreign tax authorities.

The effective tax rate for 2006 (excluding IRAP) was 21% (which represents a considerable decrease over the corresponding rateof 32% in 2005) and is the result of an increased utilisation of prior year tax losses and temporary differences for which nodeferred tax assets had been recognised in prior years.

The reconciliation between the tax charges recorded in the consolidated financial statements and the theoretical tax charge,calculated on the basis of the theoretical tax rate in effect in Italy, is the following:


Theoretical income taxes 542 747Tax effect of permanent differences (2) (452)Taxes relating to prior years 56 119Effect of difference between foreign tax rates and the theoretical Italian tax rate (29) (3)Effect of unrecognised deferred tax assets (189) 504Use of tax losses for which deferred tax assets had not been recognised (50) (83)Other differences 13 (104)Current and deferred income tax recognised in the financial statements, excluding IRAP 341 728IRAP 149 116Income taxes recorded in financial statements (current and deferred income taxes) 490 844

Net financial expenses in 2006 (excluding financial services companies) totalled 576 million euros, decreasing from the 843 millioneuros in 2005. The improvement over 2005 is a consequence of the lower level of debt in the Group’s Industrial Activities (amongstother things, as a result of the conversion of the Mandatory Convertible Facility and the completion of the Italenergia Bisoperation, both of which took place in the third quarter of 2005), and net financial income of 71 million euros arising from theequity swaps on Fiat shares, set up to support stock option plans (further details of this are provided in Note 22).

Interest earned and other financial income may be analysed as follows:


Interest income from banks 106 41Interest income from securities 17 25Commissions 2 2Other interest earned and financial income 170 190Total Interest earned and other financial income 295 258

Interest and other financial expenses may be analysed as follows:


Interest expenses on bonds 528 524Bank interest expenses 307 397Interest expenses on trade payables 10 11Other interest and financial expenses 771 763Total Interest and other financial expenses 1,616 1,695

Unusual financial incomeIn 2005 the item Unusual financial income consisted of income amounting to 858 million euros arising from the increase of capitalstock on September 20, 2005 and the simultaneous extinguishment of the Mandatory Convertible Facility (see Notes 25 and 28).In particular, this income corresponded to the difference between the subscription price of 10.28 euros per share and the marketvalue of 7.337 euros per share at the subscription date, net of associated costs. This operation led to an increase in capital stockof 1,459 million euros and in other equity reserves of 682 million euros.

10. Result from investmentsThis item includes the Group’s interest in the net result of the companies accounted for using the equity method, the write-downsconnected with the loss in value of financial assets and any reinstatement of value, the write-downs of equity investmentsclassified as held for sale, accruals to provisions against equity investments, income and expense arising from the adjustmentto fair value of investments in other entities held for trading, and dividend income. In particular, in 2006 there was a profit of125 million euros representing the net result of companies accounted for using the equity method (profit of 115 million euros in 2005).

The net result from investments in 2006 amounts to 156 million euros (34 million euros in 2005) and includes (amounts in millionsof euros): Fiat Auto Sector companies 38 (57 in 2005), entities of Agricultural and Construction Equipment Sector companies 46 (39in 2005), Iveco companies 31 (-51 in 2005) and other companies 41 (-11 in 2005).



Deferred tax assets and deferred tax liabilities may be analysed by source as follows:

TranslationAt Recognised Changes in differences At

December in income Charged the scope of and other December(in millions of euros) 31, 2005 statement to equity consolidation changes 31, 2006

Deferred tax assets arising from:- Taxed provisions 1,396 126 – (1) (32) 1,489- Inventories 223 – – – (3) 220- Taxed allowances for doubtful accounts 142 39 – (2) (7) 172- Employee benefits 675 (15) – (2) (47) 611- Write-downs of financial assets 1,073 (602) – (2) (3) 466- Measurement of derivative financial instruments 22 124 (20) – (6) 120- Other 1,099 (320) – (12) (21) 746Total Deferred tax assets 4,630 (648) (20) (19) (119) 3,824Deferred tax liabilities arising from:- Accelerated depreciation (533) 8 – 20 17 (488)- Deferred tax on gains (83) 71 – – (2) (14)- Capital investment grants (27) 10 – – – (17)- Employee benefits (24) (8) – 1 – (31)- Capitalisation of development costs (822) (89) – – 5 (906)- Other (1,011) (125) (15) 6 45 (1,100)Total Deferred tax liabilities (2,500) (133) (15) 27 65 (2,556)Theoretical tax benefit arising from tax loss carryforwards 5,011 804 – (72) (42) 5,701Adjustments for assets whose recoverability is not probable (5,442) 38 – 41 (9) (5,372)Total Deferred tax assets, net of Deferred tax liabilities 1,699 61 (35) (23) (105) 1,597

The decision to recognise deferred tax assets is taken by each company in the Group by assessing critically whether the conditionsexist for the future recoverability of such assets on the basis of updated strategic plans, accompanied by the related tax plans. Forthis reason, the total theoretical future tax benefits arising from deductible temporary differences (3,824 million euros at December31, 2006 and 4,630 million euros at December 31, 2005) and tax loss carryforwards (5,701 million euros at December 31, 2006 and5,011 million euros at December 31, 2005) have been reduced by 5,372 million euros at December 31, 2006 and 5,442 million eurosat December 31, 2005.

In particular, Deferred tax assets, net of Deferred tax liabilities, include 1,150 million euros at December 31, 2006 (965 million eurosat December 31, 2005) of tax benefits arising from tax loss carryforwards. At December 31, 2006, a further tax benefit of 4,551million euros (4,046 million euros at December 31, 2005) arising from tax loss carryforwards has not been recognised.

Deferred taxes have not been provided on the undistributed earnings of subsidiaries since the Group is able to control the timingof the distribution of these reserves and it is probable that they will not be distributed in the foreseeable future.

The totals of deductible and taxable temporary differences and accumulated tax losses at December 31, 2006, together with theamounts for which deferred tax assets have not been recognised, analysed by year of expiry, are as follows:

In order to render the reconciliation between income taxes recorded in the financial statements and theoretical income taxes moremeaningful, the IRAP tax is not taken into consideration. Since the IRAP tax has a taxable basis that is different from income beforetaxes, it generates distortions between one year and another. Accordingly, theoretical income taxes are determined by applyingonly the tax rate in effect in Italy (IRES equal to 33% in 2006 and in 2005) to income before taxes.

Permanent differences in the above reconciliation include the tax effect of non-taxable income of 206 million euros in 2006(677 million euros in 2005) and of non-deductible costs of 204 million euros in 2006 (225 million euros in 2005). In particular, in2005 the tax effect of permanent differences arose principally from the theoretical tax effect of 283 million euros on the unusualfinancial income relating to the Mandatory Convertible Facility (gross 858 million euros) and that of 290 million euros arising fromthe sale of Italenergia Bis S.p.A. (gross 878 million euros).

The reconciliation includes a positive effect of 189 million euros resulting from the recognition of net deferred tax assets notrecognised in prior years (the effect of this was negative in 2005 as the deferred tax assets originating during the year were notrecognised).

In 2006, Other differences included unrecoverable withholding tax for 20 million euros (21 million euros in 2005).

Net deferred tax assets at December 31, 2006 consist of deferred tax assets, net of deferred tax liabilities, which have been offsetwhere possible by the individual consolidated companies. The net balance of Deferred tax assets and Deferred tax liabilities maybe analysed as follows:

(in millions of euros) At December 31, 2006 At December 31, 2005 Change

Deferred tax assets 1,860 2,104 (244)Deferred tax liabilities (263) (405) 142Net deferred tax assets 1,597 1,699 (102)

The reduction in net deferred tax assets, as analysed in the following table, is mainly due to:

n negative exchange differences and other changes amounting to 105 million euros;

n the corresponding tax effect of items recorded directly in equity amounting to 35 million euros;

n changes in the scope of consolidation due to the sale of a subsidiary (B.U.C.) and to the deconsolidation of the Fiat Auto Sectorfinancial subsidiaries which were transferred to the FAFS joint venture for 23 million euros.

These components of the reduction were partly offset by the recognition of deferred tax assets, net of the realisation of deferredtax assets recognised in prior years.



2006 2005

Ordinary Preference Saving Ordinary Preference Savingshares shares shares Total shares shares shares Total

Profit attributable to equity holders of the parent million of euros 1,065 1,331

Prior period dividends to saving shares declared for the period million of euros – – 50 50 – – – –Dividends declared for the period million of euros 169 32 25 226 – – – –

Theoretical preference right on saving and ordinary shares million of euros 169 – 12 181 – – – –Profit available for distribution to all classes of shares million of euros 521 49 38 608 1,102 129 100 1,331

Profit attributable to each class of shares million of euros 859 81 125 1,065 1,102 129 100 1,331Weighted average number of shares thousand 1,088,027 103,292 79,913 1,271,232 881,177 103,292 79,913 1,064,382

Basic Earning per share euros 0.789 0.789 1.564 1.250 1.250 1.250

If prior period dividends to saving shares had not been assigned, basic and diluted earnings per savings shares in 2006 would havebeen 0.983 euros per share 0.982 euros per share, respectively. Basic and diluted earnings per share attributable to ordinary andpreference shares in 2006 would have been 0.828 euros per share and 0.827 euros per share, respectively.

For the purpose of calculating the diluted earning per share in 2006, the number of ordinary shares considered is the averagenumber of shares outstanding plus the effects arising from shares that would be issued on the exercise of all dilutive stockoptions.

During 2005 no dilutive effects arose from above mentioned stock option plans.

In 2005 and 2006 no dilutive effects arose from warrants issued by Fiat S.p.A. on its ordinary shares.

Year of expiry

Total atDecember Beyond Unlimited/

(in millions of euros) 31, 2006 2007 2008 2009 2010 2010 indeterminable

Temporary differences and tax losses relating to State taxation (IRES in the case of Italy):- Deductible temporary differences 10,445 4,723 1,281 1,210 1,159 2,010 62- Taxable temporary differences (6,347) (1,330) (1,164) (1,240) (1,072) (1,290) (251)- Tax losses 18,461 551 1,978 2,016 2,134 4,804 6,978- Temporary differences and tax losses for which

deferred tax assets have not been recognised (17,574) (1,384) (1,980) (1,916) (2,130) (4,942) (5,222)Temporary differences and tax losses relating to State taxation 4,985 2,560 115 70 91 582 1,567

Temporary differences and tax losses relating to local taxation (IRAP in the case of Italy):- Deductible temporary differences 4,025 1,013 684 656 620 1,039 13- Taxable temporary differences (4,239) (516) (936) (1,013) (850) (924) –- Tax losses 822 – – – – 246 576- Temporary differences and tax losses for which

deferred tax assets have not been recognised (1,390) (163) (81) (81) (79) (419) (567)Temporary differences and tax losses relating to local taxation (782) 334 (333) (438) (309) (58) 22

12. Earnings per shareAs explained at the Note 25 below, Fiat S.p.A. capital stock is represented by three different classes of shares (ordinary shares,preference shares and saving shares) that participate in dividends with different rights. Profit or loss of the period attributable toeach class of share is determined in accordance with the share’s contractual dividend rights, and for this purpose the net resultattributable to ordinary equity holders of the parent entity is adjusted by the amount of the dividend declared in the period foreach class of share and by any other dividends that are contractually due, in the theoretical event of a total distribution of profits.The remaining profit is then allocated equally to each of the three classes of shares as if all the profit for the period had beendistributed, with the total amount of profit allocated to each class of share being divided by the weighted average number ofoutstanding shares to determine earnings per share.

The following table shows the reconciliation between the net result attributable to equity holders of the parent and the profitattributable to each class of shares, as well as, figures used in the computation of the base earnings per share:



In 2006 Changes in accumulated amortisation and impairment losses were as follows:

TranslationAt Changes in Reclassified differences At

December Impairment the scope of to Assets and other December(in millions of euros) 31, 2005 Amortisation losses Divestitures consolidation held for sale changes 31, 2006

Goodwill 741 – 48 – – (38) (67) 684

Trademarks and other intangible assets with indefinite useful lives 61 – – – – – (11) 50

- Development costs externally acquired 667 287 2 (1) – – 46 1,001- Development costs internally generated 784 329 5 (5) – – (62) 1,051Total Development costs 1,451 616 7 (6) – – (16) 2,052

- Patents, concessions and licenses externally acquired 530 148 – (105) (10) – (9) 554Total Patents, concessions and licenses 530 148 – (105) (10) – (9) 554

- Other intangible assets externally acquired 459 58 – (33) (52) (6) (2) 424Total Other intangible assets 459 58 – (33) (52) (6) (7) 424

- Advances and intangible assets in progress externally acquired 6 – – – – – (6) –

Total Advances and intangible assets in progress 6 – – – – – (6) –

Total accumulated amortisation and impairment of Intangible assets 3,248 822 55 (144) (62) (44) (111) 3,764

Figures used to determine diluted earning per shares are as follows:

2006 2005

Ordinary Preference Saving Ordinary Preference Savingshares shares shares Total shares shares shares Total

Profit attributable to each class of shares million of euros 859 81 125 1,065 1,102 129 100 1,331Weighted average number of shares thousand 1,088,027 103,292 79,913 1,271,232 881,177 103,292 79,913 1,064,382Number of shares that would be issued from stock option plans thousand 1,580 – – 1,580 – – – –Total number of shares considered in the diluted earning per share thousand 1,089,607 103,292 79,913 1,272,812 881,177 103,292 79,913 1,064,382Diluted earning per share euros 0.788 0.788 1.563 1.250 1.250 1.250

Balance Sheet

13. Intangible assetsIn 2006, changes in the gross carrying amount of Intangible assets were as follows:

TranslationAt Changes in Reclassified differences At

December the scope of to Assets and other December(in millions of euros) 31, 2005 Additions Divestitures consolidation held for sale changes 31, 2006

Goodwill 3,159 781 – (57) (44) (305) 3,534

Trademarks and other intangible assets with indefinite useful lives 283 1 – – – (55) 229

- Development costs externally acquired 1,822 414 (7) (1) – 148 2,376- Development costs internally generated 2,232 399 (5) – (1) (173) 2,452Total Development costs 4,054 813 (12) (1) (1) (25) 4,828

- Patents, concessions and licenses externally acquired 999 81 (106) (13) – 29 990Total Patents, concessions and licenses 999 81 (106) (13) – 29 990

- Other intangible assets externally acquired 596 38 (35) (64) (7) 24 552Total Other intangible assets 596 38 (35) (64) (7) 24 552

- Advances and intangible assets in progress externally acquired 100 19 – – – (67) 52Total Advances and intangible assets in progress 100 19 – – – (67) 52

Total gross carrying amount of Intangible assets 9,191 1,733 (153) (135) (52) (399) 10,185



For the purpose of impairment testing, goodwill and other intangible assets with indefinite useful lives are allocated to the cash-generating units to which they belong. In particular the vast majority of goodwill, representing approximately 97% of the total,is allocated to cash-generating units in the CNH, Ferrari and Comau Sectors. The cash-generating units considered for the testingof the recoverability of the goodwill are generally product lines of the various Sectors. In particular, in the CNH Sector the cashgenerating units to which goodwill has been allocated consist of the different brands (CaseIH and New Holland for Agriculturalequipment, Case and New Holland Construction for construction equipment and financial services); while in Comau, goodwill hasbeen allocated to the System business, to Pico and to Service. For Ferrari the cash generating unit corresponds to the Sector as awhole.

The recoverable amount of cash-generating units is their value in use, defined as the discounted value of the expected futureoperating cash flows resulting from the estimates included in the most recent budgets and plans prepared by the Group for thenext four years, as extrapolated for later years on the basis of a medium- to long-term growth rate ranging from 0% to 2% (0%to 2% in 2005) depending on the various Sectors. The principal assumptions made in determining the value in use of cash-generating units are the discount rate and the growth rate. In particular, the Group uses discount rates which reflect currentmarket assessments of the time value of money and which take account of the risks inherent in individual cash-generating units:such pre-tax rates range between 9% and 14% (between 8% and 16% in 2005). Given the broad and varied nature of the Group’sactivities, the growth rates used are based on the forecasts made by the individual Sector to which the cash-generating unitsbelong.

In the fourth quarter of 2005, CNH began reorganizing its Agricultural equipment and construction equipment cash-generatingunits into four distinct global brand structures: the CaseIH and New Holland brands for agricultural equipment and the Case andNew Holland Construction brands for construction equipment. This reorganisation involved certain structural changes in theSector. From 2006, CNH has allocated its goodwill to these four brands and has begun performing impairment testing at the brandreporting unit level. The recoverable amount of the goodwill of the CNH Sector is determined on the basis of the value in use ofthe four new cash-generating units to which it has been allocated, by using the cash flows forecast by Sector management for thenext seven years (seven years in 2005), an annual growth rate of 2% (2% in 2005) and a pre-tax discount rate varying between 13%and 14% (10% and 16% in 2005) depending on the cash-generating unit.

The recoverable amount of the Ferrari Sector goodwill (786 million euros) is determined on the basis of the cash flows expectedby Sector management for the next five years at an annual growth rate of 2%, discounted using a pre-tax discount rate ofapproximately 10%.

The recoverable amount of the Comau Sector goodwill (153 million euros) is determined on the basis of the cash flows expectedby Sector management for the next five years at an annual growth rate of 2% (2% in 2005), discounted using a pre-tax discountrate varying between 9% and 10% unchanged from 2005 depending on the cash-generating units involved. In 2006, this valuationled to the recognition of an impairment loss of 26 million euros for goodwill allocated to the System cash generating unit of theComau Sector.

In addition, the goodwill previously allocated to the Magnesium cash generating unit of the Metallurgical Products Sector andamounting to 22 million euros became totally impaired when the assets and liabilities of the subsidiary Meridian Technologies Inc.were reclassified as Assets and Liabilities held for sale. This impairment loss was determined on the basis of fair value less coststo sell.

Development costs recognised as assets are attributed to cash generating units and are tested for impairment together withthe related tangible fixed assets, using the discounted cash flow method in determining their recoverable amount.

The net carrying amount of Intangible assets at December 31, 2006 can be analysed as follows:

TranslationAt Change in Reclassified diff. and At

December Amorti- Impairment Divesti- the scope of to Assets other December(in millions of euros) 31, 2005 Additions sation losses tures consolidation held for sale changes 31, 2006

Goodwill 2,418 781 – (48) – (57) (6) (238) 2,850

Trademarks and other intangible assets with indefinite useful lives 222 1 – – – – – (44) 179

- Development costs externally acquired 1,155 414 (287) (2) (6) (1) – 102 1,375- Development costs internally generated 1,448 399 (329) (5) – – (1) (111) 1,401Total Development costs 2,603 813 (616) (7) (6) (1) (1) (9) 2,776

- Patents, concessions and licenses externally acquired 469 81 (148) – (1) (3) – 38 436

Total Patents, concessions and licenses 469 81 (148) – (1) (3) – 38 436

- Other intangible assets externally acquired 137 38 (58) – (2) (12) (1) 26 128Total Other intangible assets 137 38 (58) – (2) (12) (1) 26 128

- Advances and intangible assets in progress externally acquired 94 19 – – – – – (61) 52

Total Advances and intangible assets in progress 94 19 – – – – – (61) 52

Total net carrying amount of Intangible assets 5,943 1,733 (822) (55) (9) (73) (8) (288) 6,421

At December 31, 2006, Goodwill consists principally of net goodwill resulting from the purchase of the Case group and othercompanies of the Agricultural and Construction Equipment Sector for 1,794 million euros (2,016 million euros at December 31,2005), the Ferrari Sector for 786 million euros (9 million euros at December 31, 2005), the Pico Group and other companies in theProduction Systems Sector for 153 million euros (194 million euros at December 31, 2005), companies in the Trucks andCommercial Vehicles Sector for 56 million euros (56 million euros at December 31, 2005), companies in the Components Sector for46 million euros (46 million euros at December 31, 2005), and companies in the Metallurgical Products Sector for 11 million euros(37 million euros at December 31, 2005). The increase of 781 million euros for the period mainly arises from the purchase in thesecond quarter of 2006 of part of the recently issued shares of Ferrari S.p.A. by Fiat S.p.A., representing 0.4% of the share capitalof the company, and from the exercise of the call option on 28.6% of Ferrari shares in the third quarter of 2006.

Trademarks and other intangible assets with indefinite useful lives consist of trademarks and similar rights from which on the basisof the competitive environment the Group expects to be able to obtain a positive contribution to its cash flows for an indefiniteperiod of time.

The Group performs impairment tests at least annually or more frequently whenever there is an indication that the goodwill and theother intangible assets with an indefinite useful life may be impaired. The recoverable amount of cash-generating units to whichgoodwill other intangible assets with an indefinite useful life and has been allocated is determined on the basis of its value in use.



In 2005 Changes in accumulated amortisation and impairment losses were as follows:

At Changes in Translation AtDecember Impairment the scope of differences and December

(in millions of euros) 31, 2004 Amortisation losses Divestitures consolidation other changes 31, 2005

Goodwill 652 – 12 – – 77 741

Trademarks and other intangible assets with indefinite useful lives 58 – – (3) – 6 61

- Development costs externally acquired 341 230 100 – (7) 3 667- Development costs internally generated 481 232 3 – – 68 784Total Development costs 822 462 103 – (7) 71 1,451

- Patents, concessions and licenses externally acquired 504 158 – (113) (38) 19 530Total Patents, concessions and licenses 504 158 – (113) (38) 19 530

- Other intangible assets externally acquired 375 69 5 (9) 14 5 459Total Other intangible assets 375 69 5 (9) 14 5 459

- Advances and intangible assets in progress externally acquired 6 – – – – – 6Total Advances and intangible assets in progress 6 – – – – – 6

Total accumulated amortisation and impairment of Intangible assets 2,417 689 120 (125) (31) 178 3,248

The net carrying amount of Intangible assets at December 31, 2005 can be analysed as follows:

TranslationAt Change in differences At

December Impairment the scope of and other December(in millions of euros) 31, 2004 Additions Amortisation losses Divestitures consolidation changes 31, 2005

Goodwill 2,157 – – (12) – 53 220 2,418

Trademarks and other intangible assets with indefinite useful lives 202 1 – – (1) 2 18 222

- Development costs externally acquired 1,230 240 (230) (100) (7) – 22 1,155- Development costs internally generated 1,259 416 (232) (3) (2) – 10 1,448Total Development costs 2,489 656 (462) (103) (9) – 32 2,603

- Patents, concessions and licenses externally acquired 472 96 (158) – (1) (21) 81 469Total Patents, concessions and licenses 472 96 (158) – (1) (21) 81 469

- Other intangible assets externally acquired 145 32 (69) (5) – 16 18 137Total Other intangible assets 145 32 (69) (5) – 16 18 137

- Advances and intangible assets in progress externally acquired 113 51 – – – – (70) 94Total Advances and intangible assets in progress 113 51 – – – – (70) 94

Total net carrying amount of Intangible assets 5,578 836 (689) (120) (11) 50 299 5,943

The decrease of 73 million euros regarding the Change in the scope of consolidation mainly reflects the deconsolidationof the entities transferred to the FAFS joint venture. In 2005 the increase of 53 million euros included the effects of the acquisitionof control of Leasys S.p.A. and Mako Elektrik Sanayi Ve Ticaret A.S., net of the effects of the entry in the scope of consolidationof the Powertrain activities previously part of the Fiat-GM Powertrain, the joint venture with General Motors, and of thereclassification to assets held for sale of the intangible assets of Atlanet S.p.A.

Foreign exchange losses of 273 million euros in 2006 (gains of 402 millions euros in 2005) principally reflect changesin the Euro/U.S. dollar exchange rate.

In 2005, changes in the gross carrying amount of Intangible assets were as follows:

At Changes in Translation AtDecember the scope of differences and December

(in millions of euros) 31, 2004 Additions Divestitures consolidation other changes 31, 2005

Goodwill 2,809 – – 53 297 3,159

Trademarks and other intangible assets with indefinite useful lives 260 1 (4) 2 24 283

- Development costs externally acquired 1,571 240 (7) (7) 25 1,822- Development costs internally generated 1,740 416 (2) – 78 2,232Total Development costs 3,311 656 (9) (7) 103 4,054

- Patents, concessions and licenses externally acquired 976 96 (114) (59) 100 999Total Patents, concessions and licenses 976 96 (114) (59) 100 999

- Other intangible assets externally acquired 520 32 (9) 30 23 596Total Other intangible assets 520 32 (9) 30 23 596

- Advances and intangible assets in progress externally acquired 119 51 – – (70) 100Total Advances and intangible assets in progress 119 51 – – (70) 100

Total gross carrying amount of Intangible assets 7,995 836 (136) 19 477 9,191



In 2006 Changes in accumulated depreciation and impairment losses were as follows:

At Change in Reclassified AtDecember Impairment the scope of Translation to Assets Other December

(in millions of euros) 31, 2005 Depreciation losses Divestitures consolidation differences held for sale changes 31, 2006

Land 7 – – (1) – – – – 6

- Owned industrial buildings 2,122 139 1 (48) (54) (35) (28) 21 2,118- Industrial buildings leased under

finance leases 10 2 – – – – – (2) 10Total Industrial buildings 2,132 141 1 (48) (54) (35) (28) 19 2,128

- Owned plant, machinery and equipment 18,265 1,541 14 (915) (185) (123) (149) 7 18,455- Plant, machinery and equipment

leased under finance leases 28 5 – – (3) (2) (9) (10) 9Total Plant, machinery and equipment 18,293 1,546 14 (915) (188) (125) (158) (3) 18,464

Assets sold with a buy-back commitment 406 152 36 (234) – 2 – (1) 361

- Owned other tangible assets 1,530 140 – (132) (31) (24) (12) (2) 1,469- Other tangible assets leased

under finance leases 4 1 – – – – – (1) 4Total Other tangible assets 1,534 141 – (132) (31) (24) (12) (3) 1,473

Advances and tangible assets in progress 9 – – – – (1) (7) (1) –

Total accumulated depreciation and impairment of Property, plant and equipment 22,381 1,980 51 (1,330) (273) (183) (205) 11 22,432

14. Property, plant and equipmentIn 2006, changes in the gross carrying amount of Property, plant and equipment were as follows:

At Change in Reclassified AtDecember the scope of Translation to Assets Other December

(in millions of euros) 31, 2005 Additions Divestitures consolidation differences held for sale changes 31, 2006

Land 533 2 (8) (9) (12) (57) 4 453

- Owned industrial buildings 4,352 119 (51) (90) (43) (28) 79 4,338- Industrial buildings leased under finance leases 73 – – – – – (4) 69Total Industrial buildings 4,425 119 (51) (90) (43) (28) 75 4,407

- Owned plant, machinery and equipment 24,213 952 (955) (199) (182) (207) 430 24,052- Plant, machinery and equipment

leased under finance leases 53 – – (5) (3) (23) (6) 16Total Plant, machinery and equipment 24,266 952 (955) (204) (185) (230) 424 24,068

Assets sold with a buy-back commitment 1,582 523 (594) – 5 – 2 1,518

- Owned other tangible assets 1,954 194 (231) (42) (29) (22) 45 1,869- Other tangible assets leased under finance leases 12 2 (1) – – – (5) 8Total Other tangible assets 1,966 196 (232) (42) (29) (22) 40 1,877

Advances and tangible assets in progress 615 642 (17) (2) (14) (41) (534) 649

Total gross carrying amount of Property, plant and equipment 33,387 2,434 (1,857) (347) (278) (378) 11 32,972



The column Other changes includes the reversal of impairment losses of 5 million euros in 2006 (16 million euros in 2005).

The column Change in the scope of consolidation shows an overall net reduction of 74 million euros which mainly reflects thedisposal of B.U.C. (24 million euros), the disposal of Sestrieres S.p.A. (23 million euros), the disposal of business Autodie businessof Comau Pico (21 million euros) and the deconsolidation of subsidiaries transferred to FAFS joint venture (10 million euros).

The column Reclassification to assets held for sale comprises the book value of the assets of Meridian Technologies Inc. and IngestFacility S.p.A., for which sales agreements reached in December 2006 were still subject to all the necessary authorisations at thebalance sheet date, of Fiat Auto in India and that of certain properties of the Iveco Sector.

Exchange losses of 95 million euros (gains of 422 million euros in 2005) principally reflect changes in the Euro/U.S. dollarexchange rate.

The column Other changes represents the reclassification of the prior year balance of Advances and tangible assets in progress tothe appropriate categories at the time the assets were effectively acquired and put into operation.

In 2005, changes in the gross carrying amount of Property, plant and equipment were as follows:

At Change in AtDecember the scope of Translation Other December

(in millions of euros) 31, 2004 Additions Divestitures consolidation differences changes 31, 2005

Land 500 1 (25) 26 24 7 533

- Owned industrial buildings 4,088 76 (143) 93 189 49 4,352- Industrial buildings leased under finance leases 48 – – – – 25 73Total Industrial buildings 4,136 76 (143) 93 189 74 4,425

- Owned plant, machinery and equipment 19,119 1,148 (1,081) 3,839 711 477 24,213- Plant, machinery and equipment leased under finance leases 29 7 – – 4 13 53Total Plant, machinery and equipment 19,148 1,155 (1,081) 3,839 715 490 24,266

Assets sold with a buy-back commitment 1,495 468 (396) – 7 8 1,582

- Owned other tangible assets 1,812 170 (187) 81 79 (1) 1,954- Other tangible assets leased under finance leases 5 5 – – – 2 12Total Other tangible assets 1,817 175 (187) 81 79 1 1,966

Advances and tangible assets in progress 677 400 – 49 30 (541) 615

Total gross carrying amount of Property, plant and equipment 27,773 2,275 (1,832) 4,088 1,044 39 33,387

The net carrying amount of Property, plant and equipment at December 31, 2006 can be analysed as follows:

At Change in Reclassified AtDecember Impairment the scope of Translation to Assets Other December

(in millions of euros) 31, 2005 Additions Depreciation losses Divestitures consolidation differences held for sale changes 31, 2006

Land 526 2 – – (7) (9) (12) (57) 4 447

- Owned industrial buildings 2,230 119 (139) (1) (3) (36) (8) – 58 2,220- Industrial buildings leased

under finance leases 63 – (2) – – – – – (2) 59Total Industrial buildings 2,293 119 (141) (1) (3) (36) (8) – 56 2,279

- Owned plant, machinery and equipment 5,948 952 (1,541) (14) (40) (14) (59) (58) 423 5,597

- Plant, machinery and equipmentleased under finance leases 25 – (5) – – (2) (1) (14) 4 7

Total Plant, machinery and equipment 5,973 952 (1,546) (14) (40) (16) (60) (72) 427 5,604

Assets sold with a buy-back commitment 1,176 523 (152) (36) (360) – 3 – 3 1,157

- Owned other tangible assets 424 194 (140) – (99) (11) (5) (10) 47 400- Other tangible assets leased

under finance leases 8 2 (1) – (1) – – – (4) 4Total Other tangible assets 432 196 (141) – (100) (11) (5) (10) 43 404

Advances and tangible assets in progress 606 642 – – (17) (2) (13) (34) (533) 649

Total net carrying amount of Property, plant and equipment 11,006 2,434 (1,980) (51) (527) (74) (95) (173) – 10,540

Additions of 2,434 million euros in 2006 mainly relate to the Automotive Sectors (Fiat Auto, Iveco, and CNH) and to the Powertrainand Magneti Marelli Sector and do not include capitalised borrowing costs.

During 2006 the Group recognised impairment losses on Assets sold with a buy-back commitment from Trucks and CommercialVehicles for an amount of 36 million euros (24 million euros in 2005) in order to align their carrying amount to market value.These losses are recognised in Cost of sales. In addition, the Group reviewed the recoverable amount of certain machinery andequipment in order to determine whether there was any reduction in value arising from technical obsolescence. This assessmentled to the recognition of an impairment loss of 15 million euros, all of which was recorded in Trading profit.



The net carrying amount of Property, plant and equipment at December 31, 2005 can be analysed as follows:

At Change in AtDecember Impairment the scope of Translation Other December

(in millions of euros) 31, 2004 Additions Depreciation losses Divestitures consolidation differences changes 31, 2005

Land 493 1 – – (25) 26 24 7 526

- Owned industrial buildings 2,157 76 (133) (30) (39) 79 104 16 2,230- Industrial buildings leased under

finance leases 43 – (3) – – – – 23 63Total Industrial buildings 2,200 76 (136) (30) (39) 79 104 39 2,293

- Owned plant, machinery and equipment 4,543 1,148 (1,435) (59) (31) 1,088 229 465 5,948- Plant, machinery and equipment

leased under finance leases 18 7 (4) – – – 3 1 25Total Plant, machinery and equipment 4,561 1,155 (1,439) (59) (31) 1,088 232 466 5,973

Assets sold with a buy-back commitment 1,106 468 (150) (24) (232) – 5 3 1,176

- Owned other tangible assets 402 170 (137) – (80) 16 28 25 424- Other tangible assets leased

under finance leases 4 5 (2) – – – – 1 8Total Other tangible assets 406 175 (139) – (80) 16 28 26 432

Advances and tangible assets in progress 671 400 (2) – – 49 29 (541) 606

Total net carrying amount of Property, plant and equipment 9,437 2,275 (1,866) (113) (407) 1,258 422 – 11,006

In 2005, the Group had written down certain industrial buildings during the year whose carrying amount was considered not to befully recoverable either through use or by a possible sale. This write-down is included in Selling, general and administrative costs.Moreover, during 2005, the Group reviewed the recoverable amount of certain production plant in view of its reorganisation andrestructuring programmes for specific Sectors. In addition, the Group carried out a recoverability assessment for assets ofbusinesses for which there were indications that impairment may have occurred, using discounted cash flow methods. Theseassessments led to the recognition of impairment losses of 59 million euros, of which 12 million euros is recognised in Tradingprofit and 47 million euros in the item Restructuring costs.

The recoverable amount of these assets was determined with reference to their value in use, calculated using a pre-tax discountrate varying between 9.5% and 18%, as a function of the different business risks.

At December 31, 2005, the amount of 1,258 million euros shown as a Change in the scope of consolidation arose mainly from theline-by-line consolidation of the Powertrain activities, previously part of Fiat-GM Powertrain (the joint venture with GeneralMotors), net of the reclassification to assets held for sale of certain plant and machinery of the subsidiary Atlanet S.p.A., for whicha sales agreement had been signed with the British Telecom group, approved by the antitrust authorities in February 2006. AtDecember 31, 2005, the column also included an amount of 32 million euros relating to the reclassification of certain propertiesand industrial buildings of CNH, no longer in use, to Assets held for sale, as the consequence of the restructuring process takingplace over the past few years following the acquisition of the Case group.

In 2005 Changes in accumulated depreciation and impairment losses were as follows:

At Change in AtDecember Impairment the scope of Translation Other December

(in millions of euros) 31, 2004 Depreciation losses Divestitures consolidation differences changes 31, 2005

Land 7 – – – – – – 7

- Owned industrial buildings 1,931 133 30 (104) 14 85 33 2,122- Industrial buildings leased under finance leases 5 3 – – – – 2 10Total Industrial buildings 1,936 136 30 (104) 14 85 35 2,132

- Owned plant, machinery and equipment 14,576 1,435 59 (1,050) 2,751 482 12 18,265- Plant, machinery and equipment

leased under finance leases 11 4 – – – 1 12 28Total Plant, machinery and equipment 14,587 1,439 59 (1,050) 2,751 483 24 18,293

Assets sold with a buy-back commitment 389 150 24 (164) – 2 5 406

- Owned other tangible assets 1,410 137 – (107) 65 51 (26) 1,530- Other tangible assets leased under finance leases 1 2 – – – – 1 4Total Other tangible assets 1,411 139 – (107) 65 51 (25) 1,534

Advances and tangible assets in progress 6 2 – – – 1 – 9

Total accumulated depreciation and impairment of Property, plant and equipment 18,336 1,866 113 (1,425) 2,830 622 39 22,381



InvestmentsThe changes in Investments in 2006 are set out below:

At Acquisitions, Change in the Disposals AtDecember Revaluations/ Capitalisations scope of Translation and other December

(in millions of euros) 31, 2005 (Write-downs) (Refunds) consolidation differences changes 31, 2006

Unconsolidated subsidiaries 46 (2) 10 – (3) (4) 47Jointly controlled entities 705 45 113 – (74) 424 1,213Associates 1,058 82 – 2 (23) (616) 503Other companies 281 – 6 – – 28 315Total Investments 2,090 125 129 2 (100) (168) 2,078

Changes in 2005 were as follows:

At Acquisitions, Change in the Disposals AtDecember Revaluations/ Capitalisations scope of Translation and other December

(in millions of euros) 31, 2004 (Write-downs) (Refunds) consolidation differences changes 31, 2005

Unconsolidated subsidiaries 32 (3) – (3) 2 18 46Jointly controlled entities 1,790 39 9 (1,210) 95 (18) 705Associates 1,740 46 12 137 24 (901) 1,058Other companies 234 (7) 23 (7) – 38 281Total Investments 3,796 75 44 (1,083) 121 (863) 2,090

Revaluations and Write-downs consist of adjustments to the carrying value of investments accounted for using the equity methodfor the Group’s share of the result for the year of the investee company for an amount of 125 million euros in 2006 (115 millioneuros in 2005). Write-downs also include, in 2006 and in 2005, any loss in value in investments accounted for under the cost method.

Acquisitions and capitalisations amounting to 129 million euros (44 million euros in 2005) include the subscription of 90 millioneuros to the capital increase made by FAFS on the formation of the joint venture.

The formation of FAFS resulted in a reduction amounting to 431 million euros of Investments in associates as a consequenceof the purchase of the 51% interest in Fidis Retail Italia held by Synesis Finanziaria S.p.A. for 479 million euros. Additionally, thesimultaneous sale to Sofinco of 50% of its capital in FAFS gave rise to an increase amounting to 528 million euros of Investmentsin jointly controlled entities. Such changes are included in the column Disposals and other changes. Also included in the columnDisposals and other changes are fair value gains of 28 million euros arising from the investment in Mediobanca S.p.A.; dividendsof 69 million euros distributed by companies accounted for using the equity method, disposal of associated companies 91 millioneuros and other minor decreases of 36 million euros.

In 2005, Disposals and other changes negative for 863 million euros were made up as follows: a decrease of 856 million eurosarising from the sale of the investment in Italenergia Bis S.p.A., as described in Note 6; positive fair value adjustments of 59million euros arising from the investment in Mediobanca S.p.A.; dividends of 47 million euros distributed by companies accountedfor using the equity method and other, minor decreases of 19 million euros.

Changes in the scope of consolidation of negative 1,083 million euros in 2005 mainly related to the consolidation on a line by linebasis of Fiat Powertrain B.V. (previously Fiat-GM Powertrain), consolidated using the equity method until December 31, 2004,

At December 31, 2006, land and industrial buildings of the Group pledged as security for debt amounted to 112 million euros(195 million euros at December 31, 2005); plant and machinery pledged as security for debt and other commitments amountedto 65 million euros (61 million euros at December 31, 2005) and other assets pledged totalled 4 million euros (nil at December31, 2005).

At December 31, 2006, the Group had contractual commitments for the acquisition of property, plant and equipment amountingto 493 million euros (418 million euros at December 31, 2005).

15. Investment propertyThe Group holds interests in certain property to earn rental income and this property is carried at cost. Changes in this item in2006 were as follows:

At Divestitures AtDecember Translation and other December

(in millions of euros) 31, 2005 Additions Depreciation differences changes 31, 2006

Gross carrying amount 36 – – – (9) 27Less: Depreciation and impairment (10) – (1) – 3 (8)Net carrying amount of Investment property 26 – (1) – (6) 19

During 2005, changes in Investment properties were as follows:

At Divestitures AtDecember Translation and other December

(in millions of euros) 31, 2004 Additions Depreciation differences changes 31, 2005

Gross carrying amount 63 – – – (27) 36Less: Depreciation and impairment (17) – (1) – 8 (10)Net carrying amount of Investment property 46 – (1) – (19) 26

Rental income from investment property in 2006 amounted to 2 million euros, in line with the 2005 amount.

16. Investments and other financial assets


Investments:Investments accounted for using the equity method 1,719 1,762Investments at fair value with changes directly in equity 274 227Investments at cost 85 101Total Investments 2,078 2,090Receivables 97 113Other securities 105 130Total Investments and other financial assets 2,280 2,333


Rizzoli Corriere della Sera MediaGroup S.p.A. is a listed company in which Fiat is one of the major shareholders, has a seat on theBoard of Directors and is a party to a stockholders’ agreement. As a result the company is considered to be an associate. In orderto account for this investment using the equity method, reference was made to its most recent published financial statementsbeing those for the third quarter of 2006, as those to be issued for financial year 2006 will be published subsequent to thepublication of the consolidated financial statements of the Fiat Group.

At December 31, 2006, the fair value of Investments in listed jointly controlled entities and listed associates, determined on thebasis of quoted market prices, is as follows:

(in millions of euros) Carrying value Fair Value

Tofas-Turk Otomobil Fabrikasi Tofas A.S. 206 498Rizzoli Corriere della Sera MediaGroup S.p.A. 107 286Turk Traktor Ve Ziraat Makineleri A.S. 23 130Al-Ghazi Tractors Ltd. 14 51Total Investments in listed jointly controlled entities and associates 350 965

At December 31, 2006, the item Investments in other companies includes the investment in Mediobanca S.p.A. of 268 million euros(227 million euros at December 31, 2005), as well as, the investment in Assicurazioni Generali S.p.A. (5 million euros), acquired in2006 as a result of the winding up of Consortium S.r.l. and the consequent transfer to its quota holders of the shares that thecompany held in Mediobanca S.p.A. and Assicurazioni Generali S.p.A. on the basis of their investments.

At December 31, 2006, there are neither investments nor other financial assets given as collateral for debt.

17. Leased assetsThe Group leases out assets, mainly its own products, as part of its financial services business. This item changed as follows in 2006:

At Change in the AtDecember scope of Translation Disposals and December

(in millions of euros) 31, 2005 Additions Depreciation consolidation differences other changes 31, 2006

Gross carrying amount 1,898 926 – (1,779) (24) (674) 347Less: Depreciation and impairment (644) – (318) 517 6 339 (100)Net carrying amount of Leased assets 1,254 926 (318) (1,262) (18) (335) 247

The net reduction of 1,262 million euros included in the column Change in the scope of consolidation reflects the deconsolidationof subsidiaries whose activities were transferred to the FAFS joint venture.

The change in 2005 was as follows:

At Change in the AtDecember scope of Translation Disposals and December

(in millions of euros) 31, 2004 Additions Depreciation consolidation differences other changes 31, 2005

Gross carrying amount 1,106 409 – 825 37 (479) 1,898Less: Depreciation and impairment (366) – (184) (300) (13) 219 (644)Net carrying amount of Leased assets 740 409 (184) 525 24 (260) 1,254


resulting in a reduction of 1,213 million euros. This reduction had been partially offset by an increase of 125 million euros arisingfrom the equity method valuation of the investment in Iveco Finance Holdings Limited, no longer consolidated on a line-by-linebasis following the sale of 51% to Barclays Mercantile Business Finance Ltd.

The item Investments in jointly controlled entities comprises the following:

At December 31, 2006 At December 31, 2005

Amount Amount% of (in millions % of (in millions

interest of euros) interest of euros)

Fiat Auto Financial Services S.p.A. (ex Fidis Retail Italia S.p.A.) 50.0 528 – –Tofas-Turk Otomobil Fabrikasi Tofas A.S. 37.9 206 37.9 245Naveco Ltd. 50.0 117 50.0 118Società Europea Veicoli Leggeri-Sevel S.p.A. 50.0 93 50.0 108Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme 50.0 61 50.0 59Consolidated Diesel Company 50.0 47 50.0 59LBX Company LLC 50.0 27 – –New Holland HFT Japan Inc. 50.0 27 50.0 35Turk Traktor Ve Ziraat Makineleri A.S. 37.5 23 – –Nan Jing Fiat Auto Co. Ltd. 50.0 22 50.0 33Transolver Finance Establecimiento Financiero de Credito S.A. 50.0 17 50.0 17New Holland Trakmak Traktor A.S. 37.5 14 – –CNH de Mexico SA de CV 50.0 13 50.0 17Other minor 18 14Total Investments in jointly controlled entities 1,213 705

The item Investments in associates comprises the following:


Amount Amount% of (in millions % of (in millions

interest of euros) interest of euros)

Iveco Finance Holdings Limited 49.0 141 49.0 131Rizzoli Corriere della Sera MediaGroup S.p.A. 9.9 107 9.9 104Kobelco Construction Machinery Co. Ltd. 20.0 97 20.0 106CNH Capital Europe S.a.S. 49.9 71 49.9 65Al-Ghazi Tractors Ltd. 43.2 14 43.2 14Fidis Retail Italia S.p.A. – – 49.0 431Turk Traktor Ve Ziraat Makineleri A.S. – – 37.5 29Immobiliare Novoli S.p.A. – – 40.0 21LBX Company LLC – – 50.0 20New Holland Trakmak Traktor A.S. – – 37.5 14Other minor 73 123Total Investments in associates 503 1,058


IN 2005 the column Change in the scope of consolidation included the effect resulting from consolidating Leasys S.p.A. on a line-by-line basis.

At December 31, 2006, minimum lease payments from non-cancellable operating leases amount to 192 million euros (420 millioneuros at December 31, 2005) and fall due as follows:


Within one year 81 215Between one and five years 107 200Beyond five years 4 5Total Minimum lease payments 192 420

18. Inventories


Raw materials, supplies and finished goods 8,240 7,499Work in progress 2,493 2,550Advances on contract work (2,286) (2,168)Total Inventories 8,447 7,881

At December 31, 2006, inventories include assets sold with a buy-back commitment by Fiat Auto for 894 million euros (748 millioneuros at December 31, 2005). Net of this amount, inventories show an increase of 420 million euros in 2006, due primarily to anincrease in the level of activities of Fiat Auto.

At December 31, 2006, Inventories include inventories measured at their net realisable value (estimated selling price less theestimated costs of completion and the estimated costs necessary to make the sale) amounting to 1,677 million euros (1,614 millioneuros at December 31, 2005).

The amount of inventory write-downs recognised as an expense during 2006 is 386 million euros (251 million euros in 2005).Amounts recognised as income from the reversal of write-downs on items sold during the year were not significant.

At December 31, 2005, the carrying amount of inventories pledged as security for loans to the Group was 463 million euros,the loans were repaid in 2006. There were no inventories pledged as security at December 31, 2006.

The majority of Work in progress and Advances on contract work relates to the Production Systems Sector and can be analysed as follows:


Gross amount due from customers for contract work as an asset 308 469Less: Gross amount due to customers for contract work as a liability (101) (87)Work in progress, net of advances on contract work 207 382Aggregate amount of costs incurred and recognised profits (less recognised losses) to date 2,493 2,550Less: Progress billings (2,286) (2,168)Work in progress, net of advances on contract work 207 382


At December 31, 2006, the amount of retentions by customers on contract work in progress was not significant (9 million euros atDecember 31, 2005).

19. Current receivablesThe composition of the caption and the analysis by due date is as follows:


due between due betweendue within one and due beyond due within one and due beyond

(in millions of euros) one year five years five years Total one year five years five years Total

Trade receivables 4,843 70 31 4,944 4,871 66 32 4,969Receivables from financing activities 7,065 4,469 209 11,743 10,796 5,007 170 15,973Other receivables 2,303 397 139 2,839 2,600 292 192 3,084Total Current receivables 14,211 4,936 379 19,526 18,267 5,365 394 24,026

At December 31, 2006, Current receivables include receivables sold and financed through both securitisation and factoringtransactions of 7,717 millions of euros (10,123 millions of euros at December 31, 2005) which do not meet IAS 39 derecognitionrequirements. These receivables are recognised as such in the Group financial statements even though they have been legallysold; a corresponding financial liability is recorded in the consolidated balance sheet as Asset-backed financing (see Note 28).

Trade receivablesTrade receivables are shown net of allowances for doubtful accounts of 514 million euros at December 31, 2006 (524 million eurosat December 31, 2005), determined on the basis of historical losses on receivables. Movements in the allowance accounts duringthe year are as follows:

At Change in the AtDecember 31, Use and other scope of December 31,

(in millions of euros) 2005 Provision changes consolidation 2006

Allowances for doubtful accounts 524 116 (108) (18) 514

The carrying amount of Trade receivables is considered in line with their fair value at the date.

At December 31, 2006, trade receivables of 42 million euros were pledged as security for loans obtained (153 million euros atDecember 31, 2005).


Receivables from financing activitiesReceivables from financing activities include the following:


Retail financing 6,482 6,655Finance leases 580 716Dealer financing 4,084 6,804Supplier financing 234 335Receivables from banking activities – 1,147Current financial receivables from jointly controlled financial services entities 143 –Financial receivables from companies under joint control, associates and unconsolidated subsidiaries 22 70Other 198 246Total Receivables from financing activities 11,743 15,973

The decrease of 4,230 million euros in Receivables from financing activities is principally due to the combined effect of thefollowing matters:

n a decrease of approximately 3,388 million euros arising from the deconsolidation of the subsidiaries whose activities weretransferred to the FAFS joint venture, this mainly affected Receivables from Dealer financing;

n the reduction to zero of Receivables from banking activities due to the disposal of B.U.C.;

n an increase of approximately 1 billion euros in retail financing and dealer financing receivables arising in the financial servicessubsidiaries that continue to be consolidated (in particular, the financial services subsidiaries of CNH);

n a decrease of 871 million euros arising from exchange differences.

Receivables from jointly controlled financial services entities include financial receivables due to Fiat entities by the FAFS group.

Receivables from financing activities are shown net of an allowance for doubtful accounts determined on the basis of specificinsolvency risks. At December 31, 2006 the allowance amounts to 331 million euros (523 million euros at December 31, 2005).Movements in the allowance accounts during the year are as follows:

At Change in the AtDecember Use and other scope of December

(in millions of euros) 31, 2005 Provisions changes consolidation 31, 2006

Allowance for receivables regarding:- Retail financing 197 66 (129) – 134- Finance leases 98 10 (24) (6) 78- Dealer financing 102 21 (21) (48) 54- Supplier financing 28 – (17) – 11- Receivables from banking activities 39 3 (1) (41) –- Financial receivables from companies under joint control,

associates and unconsolidated subsidiaries – – – – –- Other 59 3 (8) – 54Total allowance on Receivables from financing activities 523 103 (200) (95) 331

Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes 139Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes 138

Finance lease receivables relate almost entirely to vehicles of Fiat Auto, Ferrari, Trucks and Commercial Vehicles and Agriculturaland Construction Equipment Sectors leased out under finance lease arrangements and may be analysed as follows stated gross ofan allowance of 78 million euros at December 31, 2006 (98 million euros at December 31, 2005):




Receivables for future minimum lease payments 328 403 21 752 433 456 36 925Less: unrealised interest income (42) (50) (2) (94) (51) (56) (4) (111)Present value of future minimum lease payments 286 353 19 658 382 400 32 814

There are no contingent rents as finance lease recognised income during 2006 or 2005.

Unguaranteed residual values at December 31, 2006 and 2005 are not significant.

The interest rate implicit in the lease is determined at the commencement of the lease for the whole lease term. The averageinterest rate implicit in total finance lease receivables vary depending on prevailing market interest rates.

Receivables for dealer financing are typically generated by sales of vehicles and are generally managed under dealer networkfinancing programs as a component of the portfolio of the financial services companies. These receivables are interest bearing,with the exception of an initial limited, non-interest bearing period. The contractual terms governing the relationships with thedealer networks vary from Sector to Sector and from country to country, although these receivables are collected in approximatelytwo to four months on average.

The fair value of receivables from financing activities at December 31, 2006 amounts approximately to 11,282 million euros (15,821million euros at December 31, 2005) and has been calculated using a discounted cash flow method based on the following discountrates, adjusted, where necessary, to take account of the specific risk of insolvency of the underlying financial instrument.

In % EUR USD GBP CAD AUD BRL PLN

Interest rate for six months 3.85 5.37 5.43 4.33 6.55 12.60 4.30Interest rate for one year 4.03 5.33 5.58 4.31 6.52 12.37 4.55Interest rate for five years 4.13 5.09 5.37 4.24 6.49 12.12 5.02

Other receivablesAt December 31, 2006, Other receivables mainly consist of Current tax receivables of 808 million euros (778 million euros atDecember 31, 2005), Other tax receivables for VAT and other indirect taxes of 971 million euros (1,125 million euros at December31, 2005) and Receivables from employees of 62 million euros (41 million euros at December 31, 2005).

At the balance sheet date the carrying amount of Other receivables is considered to be in line with their fair value.

20. Accrued income and prepaid expensesThe item Accrued income and prepaid expenses consists mainly of prepaid insurance premiums and rent.


n the fair value of interest rate swaps and forward rate agreements is determined by using the discounted cash flow method;

n the fair value of derivative financial instruments acquired to hedge interest rate risk and exchange rate risk is determined usingthe exchange rates prevailing at the balance sheet date and the discounted cash flow method;

n the fair value of equity swaps is determined using market prices at the balance sheet date;

n the fair value of the equity option is determined using the Black-Scholes or binomial models, with market parameters(in particular the price of the underlying, interest rates, expected future dividends and volatility) being measured at the balancesheet date.

The overall decrease in Other financial assets from 454 million euros at December 31, 2005 to 382 million euros at December 31,2006, and the decrease in Other financial liabilities from 189 million euros at December 31, 2005 to 105 million euros atDecember 31, 2006, is due not only to the changes in exchange rates and interest rates over the period, but also to the expiryof certain hedging operations relating principally to bonds that have been reimbursed.

As this item consists principally of hedging instruments, the change in their value is compensated by the change in the valueof the hedged item.

Derivates for trading consist principally of the following types:

n Currency derivatives acquired to hedge receivables and payables expressed in foreign currency that are not considered by fairvalue hedges.

n Derivatives relating to Fiat shares (Equity Swap) which are described further below.

At December 31, 2006, the notional amount of outstanding derivative financial instruments is as follows:


Exchange rate risk management 7,702 5,992Interest rate risk management 8,249 10,544Interest rate and exchange rate risk management – 204Other derivative financial instruments 2,154 1,805Total notional amount 18,105 18,545

At December 31, 2006, the notional amount of Other derivative instruments consists of, amongst the others:

n For 220 million euros (70 million euros at December 31, 2005) the notional amount of the two equity swaps, expiring in 2007,stipulated to hedge the risk of an increase in the Fiat share price above the exercise price of stock options granted in 2004and 2006 to the Chief Executive Officer (see Note 25). At December 31, 2006, the Equity Swaps have a total positive fair value of 79million euros (a positive value of 8 million euros at December 31, 2005). Although these equity swaps were entered intofor hedging purposes, they do not qualify for hedge accounting under IFRS and accordingly are defined as trading derivativefinancial instruments.

n For 1,282 million euros (1,432 million euros at December 31, 2005), the notional amount of call options on General Motorscommon stock purchased in 2004 in order to hedge the risk implicit in the Convertible Bond still outstanding at that time

21. Current securitiesCurrent securities consist of short-term or marketable securities which represent temporary investments, but which do not satisfyall the requirements for being classified as cash equivalents. In particular:


Current securities available-for-sale 90 317Current securities for trading 134 239Total Current securities 224 556

During 2006, this item decreased by 332 million euros as a consequence of a changed mix in the temporary investment of fundsand for 102 million euros as a consequence of the disposal of B.U.C.

22. Other financial assets and Other financial liabilitiesThese items include the measurement at fair value of derivative financial instruments at the balance sheet date.

In particular:


Positive fair Negative fair Positive fair Negative fair(in millions of euros) value value value value

Fair value hedges:- Exchange rate risk - Forward contracts and Currency swaps 1 (1) 26 (16)- Interest rate risk - Interest rate swaps and Forward rate agreement 129 (11) 307 (26)- Interest rate and exchange rate risk - Combined interest rate and currency swaps – – 9 (1)- Other derivatives – (5) – –Total Fair value hedges 130 (17) 342 (43)

Cash flow hedge:- Exchange rate risks - Forward contracts, Currency swaps and Currency options 129 (61) 48 (95)- Interest rate swaps and Forward rate agreement 15 (8) 2 (3)Total Cash flow hedges 144 (69) 50 (98)

Derivatives for trading 108 (19) 62 (48)

Other financial assets/(liabilities) 382 (105) 454 (189)

The fair value of derivative financial instruments is determined by taking into consideration market parameters at the balance sheetdate and using valuation techniques widely accepted in the financial business environment. In particular:

n the fair value of forward contracts and currency swaps is determined by taking the prevailing exchange rate and interest ratesin the two currencies at the balance sheet date;

n the fair value of currency options is determined using valuation techniques based on the Black-Scholes model or binomialmodels and market parameters at the balance sheet date (in particular exchange rates, interest rates and volatility rates);


Fair value hedgeGains and losses resulting from the measurement of interest rate derivative financial instruments using fair value hedging rulesand the gains and losses arising from the hedged item are shown in the following table:


Interest rate risk- Net gains (losses) on qualifying hedges (107) (105)- Fair value changes in hedged items 106 105Net gains (losses) (1) –

The effect of fair value hedges related to exchange rate risk and on other derivative instruments was not material for the years2006 and 2005.

23. Cash and cash equivalentsCash and cash equivalents include:


Cash at banks 6,104 4,529Cash with a pre-determined use 627 706Money market securities 1,005 1,182Total Cash and cash equivalents 7,736 6,417

Amounts shown are readily convertible into cash and are subject to an insignificant risk of changes in value. The carrying amountof cash and cash equivalent is to be considered in line with their fair value at the balance sheet date.

Cash with a pre-determined use consists principally of cash whose use is restricted to the repayment of the debt relatedto securitisations classified in the item Asset-backed financing.

The credit risk associated with Cash and cash equivalents is limited, as contracts are entered into with primary national andinternational financial institutions.

24. Assets and Liabilities held for saleAt December 31, 2006, the items Assets and Liabilities held for sale of respectively 332 million euros and 309 million euros includethe carrying amount of the assets and the liabilities of the subsidiaries Meridian Technologies Inc. and Ingest Facility S.p.A.;the agreements for the sale of these subsidiaries were signed in 2006 and at the balance sheet date were still subject to thenecessary approvals. The items also include the assets and liabilities at carrying amount of the Indian business of Fiat Auto thatwill be transferred to the joint venture with Tata Motors currently being set up.

At December 31, 2005, the items Assets and Liabilities held for sale included the assets and liabilities of the subsidiary AtlanetS.p.A. at carrying values respectively of 119 million euros and 110 million euros: an agreement for the sale of this subsidiary wassigned with the British Telecom group in 2005 and approved by the antitrust authorities in February 2006.


(the residual debt of the Exchangeable bond linked to GM ordinary shares). Following the repayment of the majority of this bond(Note 28), these options are classified as trading instruments, even though they were originally purchased for hedging purposes,and are measured at their fair value which at December 31, 2006 and 2005 was essentially nil. These options expired unexercisedin January 2007, at the same time as the total extinguishment of the Exchangeable loan.

n For 385 million euros (303 million euros at December 31, 2005), the notional amount of derivatives embedded in certain bondswith a return linked to stock market indices or inflation rates, as well as the notional amount of the related hedging derivatives,which convert this to market rate variability.

There are no significant situations at the date of preparation of these financial statements for which hedging exceeds the hedgedfuture flows (overhedging).

Cash flow hedgesThe economic effects mainly refer to the management of the exchange risk.

The policy of the Fiat Group for managing exchange risk normally requires that future cash flows from trading activities which willoccur for accounting purposes within the following twelve months, and from orders acquired (or contracts in progress), whatevertheir due dates, to be hedged. As a result, it is considered reasonable to suppose that the hedging effect arising from this andrecorded in the cash flow hedge reserve will be recognised in income, almost entirely during the following year.

Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows of a recognised assetor liability or a highly probable forecasted transaction and could affect income statement, the effective portion of any gain or losson the derivative financial instrument is recognised directly in equity. The cumulative gain or loss is removed from equity andrecognised in the profit and loss account at the same time as the economic effect arising from the hedged item affects income.The gain or loss associated with a hedge or part of a hedge that has become ineffective is recognised in the income statementimmediately. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur,the cumulative gain or loss realised to the point of termination remains in stockholders’ equity and is recognised at the same timeas the related transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealised gain or loss heldin stockholders’ equity is recognised in the income statement immediately.

In 2006 the Group transferred to income gains of 6 million euros (gains of 44 million euros in 2005) net of tax effect previouslyrecognised directly in equity presented in the following line items:


Exchange rate risk- Increase in Net revenues 21 49- Decrease/(Increase) in Cost of sales (33) 8- Result from investments 6 –Interest rate risk- Financial income (expenses) 1 (15)Taxes income (expenses) 11 2Total recognised in the income statement 6 44

The ineffectiveness of cash flow hedges was not material for the years 2006 and 2005.


The item also includes an amount of 29 million euros (32 million euros at December 31, 2005) for certain properties and industrialbuildings owned by CNH and no longer being used as a result of the restructuring process set up in prior years following the acquisitionof the Case Group, and certain properties and industrial buildings of Fiat Auto and Iveco for an overall amount of 7 million euros.

The items included in Assets held for sale and Liabilities held for sale as of December 31, 2006, may be summarized as follows:

(in millions of euros) At December 31, 2006

Intangible assets 8Property, plant and equipment 173Leased assets 7Deferred tax assets 6Inventories 37Trade receivables 80Receivables from financing activities 6Other receivables, Accrued income and prepaid expenses 10Cash and cash equivalents 5Total Assets 332Employee benefits 13Other provisions 42Asset-backed financing –Other debt 34Trade payables 172Deferred tax liabilities 4Other payables, Accrued expenses and deferred income 44Total Liabilities 309

25. Stockholders’ equityStockholders’ equity at December 31, 2006 increased by 623 million euros over that at December 31, 2005 mainly due to netincome for the period (1,151 million euros) and foreign exchange losses from the translation into euros of the financial statementsof subsidiaries denominated in other currencies (552 million euros).

Capital stockAt December 31, 2006, the capital stock of Fiat S.p.A. is as follows:

(number of shares) At December 31, 2006 At December 31, 2005

Shares issued and fully paid- Ordinary shares 1,092,246,316 1,092,246,316- Preference shares 103,292,310 103,292,310- Saving shares 79,912,800 79,912,800Total shares issued 1,275,451,426 1,275,451,426


Issued shares have a nominal value of 5 euros, with each category having rights as follows:

Each share conveys the right to a proportionate share of the earnings available for distribution and of the residual net assets uponliquidation, without harming the rights of preference and savings shares on the allocation of the earnings as described in thefollowing paragraph.

Each ordinary share conveys the right to vote without any restrictions whatsoever. Each preference share conveys the right to voteonly on issues that are within the purview of the Extraordinary Stockholders’ Meeting and on resolutions concerning Regulationsfor Stockholders’ Meetings. Savings shares are not entitled to vote.

The net income for the year resulting from the annual financial statements of Fiat S.p.A. is allocated as follows:

n to the Legal Reserve, 5% of net income until this reserve reaches one fifth of the capital stock;

n to savings shares, a dividend of up to 0.31 euros per share;

n to the Legal Reserve (additional allocation), to the Extraordinary Reserve and/or to retained earnings, such allocations as shall bedecided by the Annual General Meeting of Stockholders;

n to preference shares, a dividend of up to 0.31 euros per share;

n to ordinary shares, a dividend of up to 0.155 euros per share;

n to savings shares and ordinary shares, in equal proportions, an additional dividend of up to 0.155 euros per share;

n to each ordinary, preference and savings share, in equal proportions, the balance of the net income which the Stockholders’Meeting resolves to distribute.

When the dividend paid to savings shares in any year amounts to less than 0.31 euros, the difference is added to the preferreddividend to which they are entitled in the following two years.

If the savings shares are delisted, they are transformed into registered shares if originally bearer shares, and have the right to ahigher dividend increased by 0.175 euros, rather than 0.155 euros, with respect to the dividend received by the ordinary andpreference shares.

If the ordinary shares are delisted, the higher dividend received by the savings shares with respect to the dividend received byordinary and preference shares is increased by 0.2 euros per share.

As no dividends were distributed in 2004 and 2005, savings shares are entitled to an additional 0.62 euros per share atDecember 31, 2006.



Fiat had nonetheless reserved the right to pay the warrant holders in cash, starting on January 2, 2007, in lieu of the shares to beissued (shares in exchange for warrants), for the difference between the average of the official market price of Fiat ordinary sharesin December 2006 and the warrant exercise price, unless this difference were to exceed the maximum amount set and previouslycommunicated by Fiat, in which case the holder of the warrants could opt to subscribe to the shares in exchange for the warrants.In the financial statements prepared in accordance with IFRS, these rights were recognised as an implicit component of theadditional paid-in capital reserve at their fair value of 18 million euros on issue. As described in Note 41 on subsequent events,4,676 warrants were exercised in January 2007 which led to the issue of 1,169 ordinary shares at a total price of 34,327 euros onFebruary 1, 2007. The remaining warrants have expired and have accordingly been cancelled.

n Pursuant to the resolution approved by the Extraordinary Stockholders’ Meeting on September 12, 2002, the Board of Directorshas the right to increase the capital one or more times by September 11, 2007, up to a maximum of 8 billion euros.

n In a meeting held on November 3, 2006, the Board of Directors of Fiat S.p.A. exercised its delegated powers pursuant to article2443 of the Italian Civil Code to increase capital stock to service the employee incentive plan reserved for employees of thecompany and/or its subsidiaries up to a maximum of 1% of that stock, being 50,000,000 euros, by taking a decision to issue amaximum of 10,000,000 ordinary shares each of nominal value 5 euros, corresponding to 0.78% of capital stock and 0.92% ofordinary capital stock, at a price of 13.37 euros each, to service the new employee stock option plan described in the followingparagraph. The execution of this increase in capital is subject to the approval of the Annual General Meeting of Stockholders and isdependant on the conditions of the increase being satisfied.

Stock-based compensationAt December 31, 2006 and at December 31, 2005, the following stock-based compensation plans relating to managers of Fiat Groupcompanies or members of the Board of Directors of Fiat S.p.A. were in place.

Stock Option plans linked to Fiat S.p.A. ordinary sharesThe Board of Directors of Fiat S.p.A. approved certain stock option plans between March 1999 and September 2002 which providemanagers of the Group with the title of Direttore and high management potential included in “management developmentprogrammes” and members of the Board of Directors of Fiat S.p.A. with the right to purchase a determined number of Fiat S.p.A.ordinary shares at a fixed price (strike price). These rights may be exercised over a fixed period of time from the vesting date tothe expiry date of the plan. These stock option plans do not depend on any specific market conditions.

These options may generally be exercised once a three year period has passed from the grant date and for the following six years,consistent with tax law and regulations on the subject; nonetheless, the full amount granted as options is not exercisable until theend of the fourth year.

The reconciliation of the number of shares outstanding at December 31, 2004 and at December 31, 2006 is as follows:

At (Purchases)/ At (Purchases)/ AtDecember Capital Sales of December Capital Sales of December

(number of shares in thousand) 31, 2004 increase treasury stock 31, 2005 increase treasury stock 31, 2006

Ordinary shares issued 800,417 291,829 – 1,092,246 – – 1,092,246Less: Treasury stock (4,384) – 52 (4,332) – 559 (3,773)Ordinary shares outstanding 796,033 291,829 52 1,087,914 – 559 1,088,473

Preference shares issued 103,292 – – 103,292 – – 103,292Less: Treasury stock – – – – – – –Preference shares outstanding 103,292 – – 103,292 – – 103,292

Saving shares issued 79,913 – – 79,913 – – 79,913Less: Treasury stock – – – – – – –Saving shares outstanding 79,913 – – 79,913 – – 79,913

Total Shares issued by Fiat S.p.A. 983,622 291,829 – 1,275,451 – – 1,275,451Less: Treasury stock (4,384) – 52 (4,332) – 559 (3,773)Total Fiat S.p.A. outstanding shares 979,238 291,829 52 1,271,119 – 559 1,271,678

In regard to changes in 2005, it is recalled that the Mandatory Convertible Facility was extinguished by its conversion to capitalstock through subscription by the Lending Banks to an increase in capital stock for consideration, as approved by the Board ofDirectors on September 15, 2005; the operation took place on September 20, 2005 (see Note 28). Capital stock increased in thismanner from 4,918,113,540 euros to 6,377,257,130 euros, through the issue of 291,828,718 ordinary shares, each of par value of 5euros, having the same characteristics as those currently in circulation, including dividend rights from January 1, 2005, pursuant toarticle 2441, paragraph 7 of the Italian Civil Code, at a price of 10.28 euros, of which 5.28 euros represents additional paid-incapital. The operation increased capital stock by 1,459 million euros, other reserves by 682 million euros, and generated unusualfinancial income of 858 million euros, net of related costs (see Note 9).

In regard to 2006, treasury stock was sold when the stock options were exercised.

The following matters have relevance with respect to the capital stock:

n Pursuant to resolutions approved by the Board of Directors on December 10, 2001 and June 26, 2003, capital could have beenincreased through rights offerings for a maximum of 81,886,460 euros, with the issuance of a maximum of 16,377,292 ordinary sharesat a par value of 5 euros each on February 1, 2007, following the exercise of the residual “FIAT ordinary share warrants 2007”.



Contractual terms of the plan are as follows:

Strike pricePlan Grant date Expiry date (euros) N° of options vested Vesting date Vesting portion

Stock Options July 26, 2004 January 1, 2011 6.583 10,670,000 June 1, 2005 22.2%July 2004 June 1, 2006 22.2%

June 1, 2007 22.2%June 1, 2008 33.4%*NMC

On November 3, 2006 the Fiat S.p.A. Board of Directors approved an eight year stock option plan, which provides certain managersof the Group and the Fiat S.p.A. Chief Executive Officer with the right to purchase a determined number of Fiat S.p.A. ordinaryshares at the fixed price of 13.37 euros per share. In particular, the 10,000,000 options granted to employees and the 5,000,000options granted to the Chief Executive Officer have a vesting period of four years, with a quarter of the number vesting each year,are subject to achieving certain pre-determined profitability targets (Non-Market Conditions or “NMC”) in the reference period andmay be exercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options granted tothe Chief Executive Officer of Fiat S.p.A. also have a vesting period of four years with a quarter of the number vesting each yearand may be exercised from November 2010.

The ability to exercise the options is additionally subject to specific restrictions regarding the duration of the employmentrelationship or the continuation of the position held. The stock option plan will become effective after approval by stockholders ingeneral meeting and once all its conditions have been satisfied.

The contractual terms of 2006 plan proposed by Board of Directors are as follows:

Strike price N° of options Plan Recipient Expiry date (euros) vested Vesting date Vesting portion

Stock Option Chief Executive November 3, 2014 13.37 5,000,000 November 2007 25%November 2006 Officer November 2008 25%

November 2009 25%November 2010 25%

Stock Option Chief Executive November 3, 2014 13.37 5,000,000 Spring 2008 (*) 25%*NMCNovember 2006 Officer Spring 2009 (*) 25%*NMC

Spring 2010 (*) 25%*NMCSpring 2011 (*) 25%*NMC

Stock Option Managers November 3, 2014 13.37 10,000,000 Spring 2008 (*) 25%*NMCNovember 2006 Spring 2009 (*) 25%*NMC


(*) On approval of the prior year’s Financial Statements.

The contractual terms of these plans are as follows:

Strike price Number of VestingPlan Recipient Grant date Expiry date (euros) options granted Vesting date portion

Stock Options 1999 Managers March 30, 1999 March 31, 2007 26.120 1,248,000 April 1, 2001 50%April 1, 2002 50%

Stock Options 2000 Managers February 18, 2000 February 18, 2008 28.122 5,158,000 February 18, 2001 25%February 18, 2002 25%February 18, 2003 25%February 18, 2004 25%

Stock Options Chairman July 25, 2000 July 25, 2008 25.459 250,000 July 25, 2001 50%July 2000 of Fiat S.p.A. May 14, 2002 50%Stock Options Managers February 27, 2001 February 27, 2009 24.853 785,000 February 27, 2002 25%February 2001 February 27, 2003 25%

February 27, 2004 25%February 27, 2005 25%

Stock Options Chairman March 29, 2001 October 30, 2008 23.708 1,000,000 July 1, 2002 100%March 2001 of Fiat S.p.A.Stock Options Managers October 31, 2001 October 31, 2009 16.526 5,417,500 October 31, 2002 25%October 2001 October 31, 2003 25%

October 31, 2004 25%October 31, 2005 25%

Stock Options Chairman May 14, 2002 January 1, 2010 12.699 1,000,000 January 1, 2005 100%May 2002 of Fiat S.p.A.Stock Options Managers September 12, 2002 September 12, 2010 10.397 6,100,000 September 12, 2003 25%September 2002 September 12, 2004 25%

September 12, 2005 25%September 12, 2006 25%

On July 26, 2004, the Board of Directors granted to Sergio Marchionne as a part of his compensation as Chief Executive Officeroptions for the purchase of 10,670,000 Fiat S.p.A. ordinary shares at the price of 6.583 euros, exercisable from June 1, 2008 toJanuary 1, 2011. In each of the first three years following the grant date, the Officer accrues the right to purchase, from June 1,2008, an annual maximum of 2,370,000 shares. From June 1, 2008, he will have the right to exercise, effective at that date, theresidual portion of the options on 3,560,000 shares. Vesting of the last block of stock options is subject to certain pre-determinedprofitability targets (Non-Market Conditions or “NMC”).



The majority of options that had been granted to managers were exercised during the fourth quarter of the year. The average priceof Fiat S.p.A. ordinary shares during this period was 14.14 euros per share.

As discussed under Significant accounting policies, in the case of share-based payments the Group applies IFRS 2 to all stockoptions granted after November 7, 2002, which had not yet vested at January 1, 2005, namely the July 2004 and November 2006stock option plans. For these stock options plans, the fair value calculated at the grant date used to determine the compensationexpense to be accrued, based on a binomial pricing model is based on the following assumptions:

Plan July 2004 Plan November 2006

Fair value at the grant date (euros) 2.440 3.99Price of Fiat S.p.A. ordinary shares (euros) 6.466 14.425Historical volatility of Fiat S.p.A ordinary shares (%) 29.37 28,33Risk free interest rate 4.021 –

In addition, it is recalled that the dividend payment rate used in the determination of the fair value at the plan grant date in July2004 was assumed to be zero, based on the experience in the period from 2003 to 2005. In determining the fair value of theNovember 2006 plan the recent statements made on future dividend prospects of approximately 25% of the consolidated Net resulthave been considered instead. In addition, the interest rate yield used in the option-pricing model for the 2006 plan is in line withthat referred to in Note 19.

The total cost recognised in the income statement for share-based payments linked to Fiat S.p.A. ordinary shares amountsto 11 million euros in 2006 (10 million euros in 2005).

Stock Option plans linked to CNH Global N.V. ordinary sharesIn the Agricultural and Construction Equipment Sector, CNH Global N.V. (“CNH”) has granted share-based compensationto directors officers and employees which are linked to shares and which have the following terms:

n The CNH Global N.V. Outside Directors’ Compensation Plan (“CNH Directors’ Plan”), as amended on April 28, 2006, provides forthe payment of the following to independent outside members of the CNH Global N.V. Board in the form of cash, and/or commonshares of CNH, and/or options to purchase common shares of CNH.

– an annual retainer fee of 65,000 USD;

– a committee membership fee of 25,000 USD; and

– a committee chair fee of 10,000 USD (collectively, the “Fees”).

In addition, on April 7, 2006, outside directors received a one-time grant of 4,000 options to purchase common shares of CNHGlobal N.V. that vest on the third anniversary of the grant date. Each quarter the outside directors elect the form of payment of1/4 of their Fees. If the elected form is options, the outside director will receive as many options as the amount of Fees that thedirector elects to forego, multiplied by four and divided by the fair market value of a common share, such fair market value beingequal to the average of the highest and lowest sale price of a CNH Global N.V. common share on the last trading day of the NewYork Stock Exchange preceding the start of each quarter. Stock options granted as a result of such an election vest immediatelyupon grant, but shares purchased under options cannot be sold for six months following the date of grant.

A summary of outstanding stock options at December 31, 2006 is as follows:

Managers compensation Compensation as member of the Board

Average remaining Average remainingOptions Options contractual life Options Options contractual life

outstanding at outstanding at (in years) at outstanding at outstanding at (in years) atExercise price (in euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2006 December 31, 2005 December 31, 2006

6.583 – – – 10,670,000 10,670,000 4.010.397 2,117,000 3,046,500 3.7 – – –12.699 – – – 1,000,000 1,000,000 3.013.37 (*) 10,000,000 – 7.8 10,000,000 – 7.816.526 1,943,500 2,299,000 2.8 – – –23.708 – – – 1,000,000 1,000,000 1.824.853 80,000 300,000 2.2 – – –25.459 – – – 250.000 250.000 1.626.120 241,900 316,000 0.3 – – –28.122 1,051,500 1,788,000 1.1 – – –Total (*) 15,433,900 7,749,500 22,920,000 12,920,000

(*) The granting of 20,000,000 stock options (of which 10,000,000 to managers and 10,000,000 to the Chief Executive officer), approved by the Board of Directors on November 3, 2006, is subject tothe approval of shareholders in general meeting pursuant to law.

Changes during the year are as follows:


Average Averageexercise price exercise price

Number of shares (in euros) Number of shares (in euros)

Outstanding at the beginning of the year 7,749,500 17.51 12,920,000 8.75Granted (*) 10,000,000 13.37 10,000,000 13.37Forfeited – – – –Exercised (558,250) 10.397 – –Expired (1,757,350) 21.54 – –Outstanding at December 31, 2006 (*) 15,433,900 14.62 22,920,000 10.76Exercisable at December 31, 2006 5,433,900 16.93 2,250,000 19.01Exercisable at December 31, 2005 6,987,875 18.28 2,250,000 19.01

(*) The granting of 20,000,000 stock options (of which 10,000,000 to managers and 10,000,000 to the Chief Executive officer), approved by the Board of Directors on November 3, 2006, is subject tothe approval of shareholders in general meeting pursuant to law.



The following table summarises outstanding stock options under the CNH EIP at December 31, 2006:

Options Outstanding Options Exercisable

Weighted Average Weighted Average Weighted AverageNumber of Shares remaining Exercise Price Number of Shares Exercise Price

Range of Exercise Price (in USD) Outstanding Contractual Life (in USD) Exercisable (in USD)

10.00 – 19.99 364,316 5.6 16.20 364,316 16.2120.00 – 29.99 387,510 5.2 21.20 – –30.00 – 39.99 523,600 4.4 31.70 523,600 31.7040.00 – 69.99 485,040 3.1 68.85 474,084 68.85Total at December 31, 2006 1,760,466 1,362,000

The Black-Scholes pricing model was used to calculate the fair value of stock options by CNH. The weighted-average assumptionsused under the Black-Scholes pricing model were as follows:

2006 2005

Directors’ plan Equity incentive plan Directors’ plan Equity incentive plan

Option life (years) 5 3.25 5 5Expected volatility of CNH Global N.V. shares (%) 71.0 34.7 72.0 71.5Expected dividend yield (%) 1.3 1.3 1.3 1.3Risk-free interest rate (%) 4.8 4.5 3.9 3.7

Based on this model, the weighted-average fair values of stock options awarded for the years ended December 31, 2006, and 2005were as follows:

(in USD) 2006 2005

CNH Directors’ Plan 14.61 10.13CNH EIP 5.78 10.18

Changes during the period in all CNH stock option plans are as follows:

Directors’ plan Equity incentive plan

Number of Average exercise Number of Average exerciseshares price (in USD) shares price (in USD)

Outstanding at the beginning of the year 169,042 21.60 2,041,070 34.62Granted during the year 54,589 25.75 2,010,046 21.20Forfeited during the year (33,874) 34.74 (1,814,131) 22.84Exercised during the year (62,987) 14.10 (476,519) 16.20Expired during the year – – – –Outstanding at December 31, 2006 126,770 23.19 1,760,466 36.42Exercisable at December 31, 2006 82,770 22.43 1,362,000 40.48Exercisable at December 31, 2005 141,872 22.50 1,747,634 36.76

At December 31, 2006 and 2005, there were 772,296 and 1 million common shares, respectively reserved for issuance under theCNH Directors’ Plan. Outside directors do not receive benefits upon termination of their service as directors.

A summary of outstanding stock options under the CNH Director Plan at December 31, 2006 is as follows:

Options Weighted Average Options Weighted Averageoutstanding at remaining contractual outstanding at remaining contractual

Exercise price (in USD) December 31, 2006 life (in years) December 31, 2005 life (in years)

9.15 – 15.70 23,271 6.2 64,348 8.315.71 – 26.20 50,150 8.6 71,055 8.426.21 – 40.00 48,104 8.2 18,654 5.540.01 – 56.00 1,622 3.8 4,460 4.956.01 – 77.05 3,623 3.3 10,525 4.3Total at December 31, 2006 126,770 7.8 169,042 7.7

n The CNH Equity Incentive Plan, as amended (the “CNH EIP”) provides for grants of various types of awards to officers andemployees of CNH and its subsidiaries. In 2006, the CNH EIP was amended to reserve an additional 10,300,000 shares, raisingtotal reserved shares to 15,900,000. The amended CNH EIP now requires that CNH shareholders, at the CNH Global N.V.: AnnualGeneral meeting or any Extraordinary General Meeting, ratify and approve the maximum number of shares available under theEIP. In connection with this new requirement, CNH received written confirmation from Fiat, which at the time ownedapproximately 90% of CNH’s issued and outstanding common stock, that would vote at the next Annual General meeting toapprove the increase in available shares under the CNH EIP.

Prior to 2006, certain stock option grants were issued which vest ratably over four years from the grant date and expire after tenyears. Certain performance-based options, which had an opportunity for accelerated vesting tied to the attainment of specifiedperformance criteria were issued; however, the performance criteria was not achieved. In any event, vesting of these optionsoccurs seven years from the grant date. All options granted prior to 2006 have a contract life of ten years.

Except as noted below, the exercise prices of all options granted under the CNH EIP are equal to or greater than the fair market valueof CNH common shares on the respective grant dates. During 2001, CNH granted stock options with an exercise price less than thequoted market price of our common shares at the date of grant. The exercise price of this grant was based upon the average closingprice of CNH common shares on the New York Stock Exchange for the thirty-day period preceding the date of grant.

In 2006, the CNH Long-Term Incentive (“LTI”) award discussed below was replaced by plans providing performance based stockoptions, cash, and stock options. As a part of this change, CNH, in September 2006, granted approximately 2.0 million performancebased stock options which will result in an estimated expense over the vesting period of approximately 10 USD million (at targetedperformance levels) under its EIP. Target performance levels were not achieved, resulting in only 387,510 shares vesting. All of theother performance based stock options were forfeited. One-third of the options vested with the approval of 2006 results by theBoard of Directors. The remaining options will vest equally on the first and second anniversary of the initial vesting date. The actualnumber of shares vesting may exceed 2 million if CNH’s performance exceeds targets; however, if minimum target levels are notachieved, the options will not vest. Options granted under the EIP in 2006 have a five years contractual life.



Stock Option linked to Ferrari S.p.A. ordinary sharesUnder this scheme, certain employees of Ferrari S.p.A., and the Chairman and the Chief Executive Officer of the company at thetime, have the option to acquire respectively 207,200 and 184,000 Ferrari S.p.A. ordinary shares at a strike price of 175 euros pershare. Under the scheme the options may be exercised until December 31, 2010, wholly or partially, and are subject to a limitedextent to the company’s listing process. A total of 104,000 options granted to the Chairman of Ferrari S.p.A. were exercised in 2006and settled by carrying out an increase in capital stock, while a further 140,800 options were forfeited. At December 31, 2006 theemployees and the Chairman held respective totals of 66,400 and 80,000 stock option rights under this scheme, all of whoseexercise rights are subordinated to the listing of the company.

Cash-settled share-based paymentsCertain entities of the Fiat Powertrain Technologies Sector have agreed in 2001, 2002, 2003 and 2004 with a number of employeesa total of four cash-settled share-based payment defined Stock Appreciation Rights (SAR) plans. Under these plans, certainemployees involved have the right to receive a payment corresponding to the increase in share price between the grant date andthe exercise date of General Motors $1 2/3 shares listed in New York and Fiat S.p.A. ordinary shares listed in Milan. The right isexercisable from the vesting date to the expiry date of the plans and is subordinated to certain conditions (Non-Market Conditions“NMC”). The contractual terms of these rights are as follows:

Outstanding Outstandingrights on GM $1 rights on

2/3 shares Fiat S.p.A. shares Grant price Grant priceat December at December GM $1 2/3 Fiat S.p.A. Vesting

Plan Grant date From Until 31, 2006 31, 2006 (in USD) (in euros) portion

2001 February 12, 2002 March 1, 2002 February 12, 2009 45,053 220,176 49.57 15.50 100%*NMC2002 February 12, 2002 February 12, 2003 February 12, 2010 44,580 207,490 49.57 15.50 1/3*NMC

February 12, 2004 February 12, 2010 1/3*NMCFebruary 12, 2005 February 12, 2010 1/3*NMC

2003 February 11, 2003 February 11, 2004 February 11, 2011 46,644 96,694 36.26 7.95 1/3*NMCFebruary 11, 2005 February 11, 2011 1/3*NMCFebruary 11, 2006 February 11, 2011 1/3*NMC

2004 February 10, 2004 February 10, 2005 February 11, 2012 40,470 181,042 49.26 6.03 1/3*NMCFebruary 10, 2006 February 11, 2012 1/3*NMCFebruary 10, 2007 February 11, 2012 1/3*NMC

Changes during the period are as follows:

rights on GM $1 2/3 shares rights on Fiat S.p.A. shares

Outstanding at the beginning of the year 176,747 847,135Granted during the year – –Forfeited during the year – –Exercised during the year – (141,733)Expired during the year – –Outstanding at December 31, 2006 176,747 705,402Exercisable at December 31, 2006 176,747 705,402Exercisable at December 31, 2005 176,747 847,135

Under the CNH EIP, performance-based restricted shares may also be granted. CNH establishes the period and conditionsof performance for each award and holds the shares during the performance period. Performance-based restricted shares vestupon the attainment of specified performance objectives. Certain performance-based restricted shares vest no later than sevenyears from the award date.

In 2004, a LTI award for which payout is tied to achievement of specified performance objectives was approved under the CNH EIPfor selected key employees and executive officers. The LTI awards are subject to the achievement of certain performance criteria overa 3-year performance cycle. At the end of the 3-year performance cycle, any earned awards will be satisfied equally with cash andCNH common shares as determined at the beginning of the performance cycle, for minimum, target, and maximum award levels.

As a transition to the LTI, the first award for the 2004-2006 performance cycle provided an opportunity to receive an acceleratedpayment of 50% of the targeted award after the first two years of the performance cycle. Objectives for the first two years of theperformance cycle were met and an accelerated payment of cash and 66,252 shares were issued in 2006. Ultimately, thecumulative results for the 2004-2006 performance cycle were achieved and the remaining award will be issued in early 2007.

A second 3 year LTI award for the 2005-2007 performance cycle was granted in 2005. Vesting will occur after 2007 results areapproved by the CNH Global N.V. Board of Directors.

In connection with changes to the LTI, CNH granted approximately 2.2 million performance based, non-vested share awards underits EIP to approximately 200 of the Company’s top executives. These shares were to cliff vest when 2008 audited results areapproved by the CNH Global N.V. Board of Directors (estimated to be February 2009) if specified fiscal year 2008 targets wereachieved. In December 2006, CNH extended this grant by providing participants an additional opportunity for potential partialpayouts should these targets not be achieved until 2009 or 2010. All other terms remained unchanged. The grant date fair valueon the date of the modification ranges from 27.35 USD per share to 26.27 USD depending on the service period over which thegrant ultimately vests. The fair value is based on the market value of CNH’s common shares on the date of the grant modificationand is adjusted for the estimated value of dividends which are not available to participants during the vesting period. Dependingon the period during which targets are achieved, the estimated expense over the service period can range from approximately28 USD million to 52 USD million (current estimate is 38 USD million). If specified targets are not achieved by 2010, the sharesgranted will not vest.

As of December 31, 2006, outstanding performance shares under the 2006, 2005, and 2004 awards under the CNH EIP were asfollows:

2006 2005 2004(number of shares) award award award

Granted 4,475,000 195,946 235,134Exercised – – (66,252)Cancelled (2,237,500) – –Forfeited – (45,834) (119,442)Outstanding at December 31. 2006 2,237,500 150,112 49,440

As of December 31, 2006 and 2005, there were 10,642,793 common shares available for issuance under the CNH EIP.

The total cost recognised in the 2006 income statement for all share-based compensation linked to CNH Global N.V. ordinaryshares amounted to 4 million euros (1 million euros in 2005).


In accordance with IFRS 2, the Group measures the liability arising from cash-settled share-based payment transactions at fair valueat each reporting date and at the date of settlement; the changes in the fair value of these liabilities are recognised in the incomestatement for the period. At December 31, 2006 and 2005, the Group measured the fair value of the liabilities generated by theseplans using the binomial method based on the following assumptions:


Fiat S.p.A. Fiat S.p.A.GM $1 2/3 share ordinary share GM $1 2/3 share ordinary share

Closing price $ 30.72 € 14.425 $ 19.42 € 7.36Expected volatility (%) 42.67 28.33 77.56 28.39Expected dividend yield (%) 3.26 – 10.30 0.00

The dividends expected to be paid on the ordinary shares of Fiat S.p.A. and used in the binomial model for 2006 are those referredto in recent statements made by the Group, consistent with the approach taken for the stock options granted by Fiat S.p.A. in 2006.

The fair value of the above mentioned rights at December 31, 2006 and at December 31, 2005 amounts to:

Fair value at December 31, 2006 Fair value at December 31, 2005

Fiat S.p.A. Fiat S.p.A.(in euros) GM $1 2/3 share ordinary share GM $1 2/3 share ordinary share

2001 Plan 2.33 2.18 3.28 0.232002 Plan 3.44 2.64 3.99 0.412003 Plan 6.37 6.95 5.37 2.102004 Plan 5.22 8.59 4.92 3.15

A loss of 2 million euros from the total change in the fair value of these cash-settled share-based payment plans was recognisedby the Group in 2006 income (a loss of 2 million euros in 2005).

Treasury StockTreasury stock consists of 3,773,458 Fiat S.p.A. ordinary shares for an amount of 24 million euros (4,331,708 ordinary shares for anamount of 28 million euros at December 31, 2005).

Capital reserveAt December 31, 2006, the Capital reserve includes 682 million euros of additional paid-in capital for a total amount of 1,541million euros consisting of the share premium paid by the subscribers of the capital increase made after the extinguishment of theMandatory Convertible Facility on September 20, 2005 described at the paragraph Capital stock; 859 million euros are in to Earningreserves.

Earning reservesThe principal earning reserves are as follows:

n The legal reserve of Fiat S.p.A. of 447 million euros at December 31, 2006 (447 million euros at December 31, 2005);

n Retained earnings totalling 262 million euros at December 31, 2006 (retained losses totalling 1,055 million euros at December 31, 2005);


n The net result before minority interest of 1,065 million euros for the year ended December 31, 2006 (net result of 1,331 millioneuros for the year ended December 31, 2005);

n The share based payments reserve of 27 million euros at December 31, 2006 (16 million euros at December 31, 2005).

Income (expense) recognised directly in equityThis item consists of accumulated other comprehensive income at December 31, 2006; changes for the two years then ended are asfollows:

Available- Cumulative Income (expense)Cash flow for-sale translation recognised

(in millions of euros) hedge reserve reserve differences directly in equity

Balances at January 1, 2005 33 75 (75) 33Gains (losses) recognised directly in the cash flow hedge reserve (16) – – (16)Gains (losses) recognised directly in the available-for-sale reserve – 61 – 61Gains (losses) on translation differences – – 921 921(Net profit) loss (44) – – (44)Balances at December 31, 2005 (27) 136 846 955Gains (losses) recognised directly in the cash flow hedge reserve 109 – – 109Gains (losses) recognised directly in the available-for-sale reserve – 46 – 46Gains (losses) on translation differences – – (551) (551)(Net profit) loss (6) (12) (1) (19)Balances at December 31, 2006 76 170 294 540

Minority interestThe minority interest in stockholders’ equity of 674 million euros (732 million euros at December 31, 2005) refers mainly to thefollowing companies consolidated on a line-by-line basis:

% held by minority stockholders


Italian companies:Ferrari S.p.A. 15.0 44.0Teksid S.p.A. 15.2 15.2Foreign companies:CNH Global N.V. 10.3 16.1



Provisions for employee benefits at December 31, 2006 and 2005 are as follows:


Post-employment benefits:- Employee severance indemnity 1,270 1,283- Pension Plans 795 903- Health care plans 986 1,102- Other 259 294Total post-employment benefits 3,310 3,582Other provisions for employees 266 216Other long-term employee benefits 185 152Total provision for employee benefits 3,761 3,950

Defined benefit plan assets 11 –Total Defined benefits plan assets 11 –

In 2006, changes in Other provisions for employees and in Other long-term employee benefits are as follows:

Change in the scope ofAt December consolidation and At December

(in millions of euros) 31, 2005 Provision Utilisation other changes 31, 2006

Other provisions for employees 216 209 (129) (30) 266Other long-term employee benefits 152 21 (14) 26 185Total 368 230 (143) (4) 451

In 2005, changes in Other provisions for employees and in Other long-term employee benefits were as follows:

Change in the scope ofAt December consolidation and At December

(in millions of euros) 31, 2004 Provision Utilisation other changes 31, 2005

Other provisions for employees 100 136 (28) 8 216Other long-term employee benefits 140 18 (13) 7 152Total 240 154 (41) 15 368

Post-employment benefits and Other long-term employee benefits are calculated on the basis of the following actuarialassumptions:


In % Italy USA UK Other Italy USA UK Other

Discount rate 3.98 5.80 5.00 4-5 3.53 5.50 4.75 1-5.25Future salary increase 3.65 n/a 3.50 1.5-3.5 2.58 n/a 3.50 2.25-3.5Inflation rate 2.00 n/a 3.00 2.00 2.00 n/a 2.75 2.00Increase in healthcare costs n/a 5-10 n/a n/a n/a 5-10 n/a n/aExpected return on plan assets n/a 8.25 7.25 n/a n/a 8.25 6.88 n/a

26. Provisions for employee benefitsGroup companies provide post-employment benefits for their employees, either directly or by contributing to independentlyadministered funds.

The way these benefits are provided varies according to the legal, fiscal and economic conditions of each country in which theGroup operates, the benefits generally being based on the employees’ remuneration and years of service. The obligations relateboth to active employees and to retirees.

Group companies provide post-employment benefits under defined contribution and/or defined benefit plans.

In the case of defined contribution plans, the company pays contributions to publicly or privately administered pension insuranceplans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the company has no further paymentobligations. Liabilities for contributions accrued but not paid are included in the item Other payables (see Note 30). The entityrecognise the contribution cost when the employee has rendered his service and includes this cost by destination in Cost of Sales,Selling, General and Administrative costs and Research and development costs. In 2006, these expenses totalled 1,161 millioneuros (1,080 million euros in 2005).

Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes byits employees, into an entity, or fund, that is legally separate from the employer and from which the employee benefits are paid.

In the case of funded and unfunded post employment benefits, included in the item Post-employment benefits, the Groupobligation is determined on an actuarial basis, using the Projected Unit Credit Method and is offset against the fair value of planassets, if any. Where the fair value of plan assets exceed the post-employment benefits obligation, and the group has a right ofreimbursement or a right to reduce future contributions, the surplus amount is recognised in accordance with IAS 19 as an asset.As discussed in the paragraph Significant accounting policies, actuarial gains and losses are accounted for from January 1, 2004using the corridor approach.

Finally, the Group grants certain other long-term benefits to its employees; these benefits include those generally paid when theemployee attains a specific seniority or in the case of disability. In this case the measurement of the obligation reflects theprobability that payment will be required and the length of time for which payment is expected to be made. The amount of thisobligation is calculated on an actuarial basis using the Projected Unit Credit Method. The corridor approach is not used foractuarial gains and losses arising from this obligation.

The item Other provisions for employees consists of the best estimate at the balance sheet date of short-term employee benefitspayable (such as bonuses for example) by the Group within twelve months after the end of the period in which the employeesrender the related.



The amounts recognised in the balance sheet at December 31, 2006 and 2005 for post-employment benefits are as follows:

Employee severance Pension Healthindemnity Plans care plans Other

At December At December At December At December At December At December At December At December(in millions of euros) 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005

Present value of funded obligations – – 2,296 2,647 – – – –Less: Fair Value of plan assets – – (2,176) (2,115) – – – –

– – 120 532 – – – –Present value of unfunded obligations 1,362 1,417 811 539 1,109 1,417 278 323Unrecognised actuarial gains (losses) (92) (134) (151) (164) (161) (370) (18) (28)Less: Unrecognised past service cost – – (1) (4) 38 55 (1) (1)Unrecognised assets – – 5 – – – – –Net liability 1,270 1,283 784 903 986 1,102 259 294

Amounts in the balance sheet:- Liabilities 1,270 1,283 795 903 986 1,102 259 294- Less: Assets – – (11) – – – – –Net liability 1,270 1,283 784 903 986 1,102 259 294

The amounts recognised in the income statement for Post-employment benefits are as follows:

Employee severanceindemnity Pension Plans Health care plans Other


Current service cost 91 86 37 48 12 12 13 16Interest costs 49 33 149 146 67 60 11 9Less: Expected return on plan assets – – (152) (133) – – – –Net actuarial losses (gains) recognised in the year 3 1 (4) – 22 14 (2) 4Past service costs – – 1 1 (11) (11) – 1Paragraph 58 adjustment – – 3 – – – – –Losses (gains) on curtailments and settlements – – – – – – (1) (1)Plan amendments – – 15 (8) (31) (98) – –Other 1 1 – (7) – 1 – (3)Total Costs (gains) for post-employment benefits 144 121 49 47 59 (22) 21 26Actual return on plan assets n/a n/a 198 213 n/a n/a n/a n/a

Reserve for employee severance indemnity (“TFR”)The reserve for employee severance indemnities comprises liability for severance indemnities that Italian companies accrue eachyear end for employees, as required by Italian labour legislation. This provision is settled to retiree employees and, shall bepartially paid in advance if certain conditions are met. This defined benefit post-employment plan is unfunded.

Pension plansThe item Pension plans consists principally of the obligations of Fiat Group companies operating in the United States (mainly tothe CNH Sector) and in the United Kingdom.

Under these plans a contribution is generally made to a separate fund (trust) which independently administers the plan assets. Theplan provides for a fixed contribution by employees and for a variable contribution by the employer necessary to, at a minimum, tosatisfy the funding requirements as prescribed by the laws and regulations of each country. Prudently the Group makesdiscretionary contributions in addition to the funding requirements. If these funds are overfounded, that is if they present a surpluscompared to the requirements of law, the Group companies concerned are not required to contribute to the plan in respect of theminimum performance requirement as long as the fund is in surplus. The administration strategy for these assets depends on thefeatures of the plan and on the maturity of the obligations. Typically, longer term plan benefit obligations are funded by investingin more equity securities; shorter term plan benefit obligations are funded by investing in more fixed income securities.

With regard to pension plans in the United States from January 1, 2003 CNH Global N.V. makes contributions to these plans alsoby ordinary shares and not only by cash.

In the United Kingdom the Fiat Group participates in a plan financed by various entities belonging to the Fiat Group, called the“Fiat Group Pension Scheme”, amongst others. Under this plan, participating employers make contributions on behalf of theiractive employees (active), retirees (pensioners) and employees who have left the Group but have not yet retired (deferred).

Health care plansThe item Health care plans comprise obligations for health care and insurance plans granted to employees of the Fiat Groupworking in the United States and Canada. These plans, which are unfunded, generally cover all employees retiring on or afterreaching the age of 55 who have had at least 10 years of service with the Group.

OtherThe item Other includes loyalty bonuses, which are due to employees who reach a specified seniority and are generally settledwhen an employee leaves the Group; and for French entities, the Indemnité de depart à la retraite, a plan similar to the Italian TFR.These schemes are unfunded.



Pension Plans


Opening fair value of plan assets 2,115 1,709Expected return on plan assets 152 133Actuarial gains (losses) 46 80Exchange rate differences (74) 146Contribution by employer 147 180Contribution by plan participants 6 9Benefits paid (145) (147)Change in the scope of consolidation – 1(Gains) losses on settlements (72) –Other changes – 4Closing fair value of plan assets 2,176 2,115

Plan assets for Post-employment benefits mainly consist of listed equity instruments and fixed income securities; plan assets donot include treasury stock of Fiat S.p.A. or properties occupied by Group companies.

Plan assets may be summarised as follows:

In % At December 31, 2006 At December 31, 2005

Third party equity instruments 56 54Third party debt instruments 39 42Properties occupied by third parties 1 1Other assets 4 3

Assumed healthcare cost trend rates have a significant effect on the amount recognised in the 2006 income statement. A onepercentage point change in assumed healthcare cost trend rates would have the following effects:

(in millions of euros) One percentage point increase One percentage point decrease

Effect on the aggregate of the service costs and interest cost 26 21Effect on defined benefit obligation 156 122

The present value of the defined benefit obligations in 2006 and at the end of the three previous years is as follows:

At December At December At December At December(in millions of euros) 31, 2006 31, 2005 31, 2006 31, 2005

Present value of obligation:- Employee severance indemnity 1,362 1,417 1,243 1,265- Pension plans 3,107 3,186 2,830 2,713- Healthcare plans 1,109 1,417 1,186 1,095- Others 278 323 278 275Total 5,856 6,343 5,537 5,348

Changes in the present value of Post-employment obligations are as follows:

Employee severanceindemnity Pension Plans Health care plans Other


Present value of obligation at the beginning of the year 1,417 1,243 3,186 2,830 1,417 1,186 323 278Current service cost 91 86 37 48 12 12 13 16Interest costs 49 33 149 146 67 60 11 9Contribution by plan participants – – 6 5 7 7 – –Actuarial losses (gains) (39) 47 41 137 (156) 177 (4) 8Exchange rate differences – – (89) 185 (140) 187 (4) 5Benefits paid (141) (150) (158) (162) (67) (64) (37) (39)Past service cost – – – – – (49) – 2Change in scope of consolidation (5) 158 (4) (1) – – (6) 24(Gains) Losses on curtailments – – – – – – – (1)(Gains) Losses on settlements – – (72) – – – – –Plan amendments – – 15 (8) (31) (98) – –Other changes (10) – (4) 6 – (1) (18) 21Present value of obligation at the end of the year 1,362 1,417 3,107 3,186 1,109 1,417 278 323

The item (Gains) Losses on settlements (-72 million euros) is referred to the settlement of a funded defined benefit pension planin the Trucks and Commercial Vehicles Sector as a consequence of the disposal to an insurance company of a pension plan of asubsidiary being wound up.

Plan amendments, recognised in the income statement and in changes in the present value of the obligations, mainly relate to 1)the effect of the modifications made to the CNH U.S. Pension Plan during the year, following a reduction in the number ofmembers of the plan and the granting of various benefits to employees and 2) the amendments to healthcare plans including aneffect of 25 million euros in 2006 arising from modifications to the “CNH Health & Welfare Plan” and the “CNH Employee GroupInsurance Plan”.

The effect of Plan amendments in 2005 on the amounts recognised for pension plans and healthcare plans both in the incomestatement and in changes in the present value of the obligations, was mainly due to a structural reduction in welfare benefits andresulting costs in North America, carried out by the CNH entities. These amendments mainly regarded the “CNH Health & WelfarePlan”, the “CNH Employee Group Insurance Plan” and the “CNH Retiree Medical Savings Account Plan”.

Changes in the scope of consolidation relate mostly to the deconsolidation of the subsidiaries transferred to the FAFS joint ventureand the disposal of Sestrieres S.p.A. In 2005, this change principally related the first-time consolidation of the assets and liabilitiesof Powertrain, formerly part of Fiat-GM Powertrain, the joint venture with General Motors, and the effect of acquiring control ofLeasys S.p.A.

Other changes includes the reclassification of the employee severance indemnity liability and other defined benefit plan liabilitiesof Ingest Facility S.p.A. to Liabilities held for sale.

Changes in the fair value of plan assets are as follows:



The total balance at December 31, 2006 relates to corporate restructuring programs of the following Sectors (in millions of euros):Fiat Auto 137 (175 at December 31, 2005); Agricultural and Construction Equipment 148 (72 at December 31, 2005); Powertrain 61(15 at December 31, 2005), Trucks and Commercial Vehicles 49 (102 at December 31, 2005); Metallurgical Products 18 (19 atDecember 31, 2005); Components 25 (28 at December 31, 2005); Production Systems 83 (48 at December 31, 2004); Services 18(16 at December 31, 2005); Other sectors 22 (13 at December 31, 2005).

The provision for other risks represents the amounts set aside by the individual companies of the Group principally in connectionwith contractual and commercial risks and disputes. The more significant balances of these provisions are as follows.


Sales Incentives 851 856Legal proceedings and other disputes 630 598Commercial risks 808 877Environmental risks 95 149Indemnities 49 87Other reserves for risk and charges 535 576Other risks 2,968 3,143

A description of these follows:

n Sales Incentives - These provisions relate to sales incentives that are offered on a contractual basis to the Group’s dealernetworks, primarily on the basis of the dealers achieving a specific cumulative level of revenue transactions during the calendaryear. This provision is estimated based on the information available regarding the sales made by the dealers during the calendaryear. The provision also includes sales incentives such as cash rebates announced by the Group and provided by dealers tocustomers, for which the dealers are reimbursed. The Group records these provisions when it is probable that the incentive will beprovided and the Group’s inventory is sold to its dealers. The Group estimates these provisions based on the expected use of theserebates with respect to the volume of vehicles that has been sold to the dealers.

n Legal proceedings and other disputes -This provision represents management’s best estimate of the liability to be recognised bythe Group with regard to:

– Legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such as contractualor patent disputes).

– Legal proceedings involving claims with active and former employees.

– Legal proceedings involving different tax authorities.

None of these provisions is individually significant. Each Group company recognises a provision for legal proceedings whenit is deemed probable that the proceedings will result in an outflow of resources. In determining their best estimate of the probableliability, each Group company evaluates their legal proceedings on a case-by-case basis to estimate the probable losses thattypically arise from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legalcounsel and other experts, the experience of the Group and others in similar situations and the Group’s intentions with regard tofurther action in each proceeding. Fiat’s consolidated provision aggregates these individual provisions established by each of theGroup’s companies.

The effects of the differences between the previous actuarial assumptions and what has actually occurred (experience adjustments)at December 31, 2006 and 2005, is as follows:

At December At December(in millions of euros) 31, 2006 31, 2005

Experience adjustments actuarial (gains) losses:- Employee severance indemnity (3) 48- Pension plans 57 (7)- Healthcare plans 6 18- Others 61 (25)Total Experience adjustments actuarial (gains) losses on the present value of defined benefit obligation 121 34Plan assets 10 15Total Experience adjustments actuarial (gains) losses on the fair value of the plan assets 10 15

The best estimate of expected contribution to pension and healthcare plan for 2007 is as follows:

(in millions of euros) 2007

Pension plans 151Healthcare plans 69Total expected contribution 220

27. Other provisionsChanges in Other provisions for the year ended at December 31, 2006 are as follows:

At December Release to Other At December(in millions of euros) 31, 2005 Charge Utilisation income changes 31, 2006

Warranty provision 1,046 1,157 (981) (28) 60 1,254Restructuring provision 488 331 (224) (9) (25) 561Investment provision 71 – – – (4) 67Other risks 3,143 2,046 (1,886) (178) (157) 2,968Total Other provisions 4,748 3,534 (3,091) (215) (126) 4,850

The effect of discounting provisions amounts to 10 million euros in 2006 and has been included in the Other changes as thenegative effect of exchange rate differences amounting to 87 million euros.

The warranty provision represents management’s best estimate of commitments given by the Group for contractual, legal orconstructive obligations arising from product warranties given for a specified period of time which begins at the date of deliveryto the customer. This estimate has been calculated considering, past experience and specific contractual terms.

The restructuring provision comprises the estimated amount of benefits payable to employees on termination in connection withrestructuring plans amounting to 456 million euros at December 31, 2006 (391 million euros at December 31, 2005), other costsfor exiting activities amounting to 25 million euros at December 31, 2006 (10 million euros at December 31, 2005) and other coststotalling 80 million euros at December 31, 2006 (87 million euros at December 31, 2005).



n Global Medium Term Note (GMTN Program): a maximum of 15 billion euros may be used under this Program, of which notesof approximately 4.2 billion euros have been issued to date; the program is guaranteed by Fiat S.p.A. The issuer taking part in theprogram is, among others, Fiat Finance & Trade Ltd. for an amount outstanding of 4,175 million euros. During 2006, under thisprogram, a bond having a nominal value of 1 billion euros has been issued at a price of 99.565; this bond bears fixed interest at5.625% and is repayable on November 15, 2011.

n Convertible bonds: these represent the residual debt of 13 million euros remaining after the partial repayment in July 2004, ofthe 5-year bond originally convertible into General Motors Corporation common stock (the “Exchangeable bond”) at a conversionprice of 69.54 U.S. dollars per share, bearing interest at 3.25% and repayable on January 9, 2007. In order to hedge the risk,implicit in the bond, of an increase in the General Motors share price above 69.54 U.S. dollars, the Group purchased call optionson General Motors common stock. These options, although originally purchased for hedging purposes, are classified as trading(see also Note 22).

n Other bonds: these refer to the following issues:

– Fiat Finance & Trade Ltd. bond having a nominal value of 1 billion euros, issued at par, bearing fixed interest at 6.625% andrepayable on February 15, 2013.

– Case New Holland Inc. (“CNH Inc.”) bond having a nominal value of 500 million of U.S. dollars (equivalent to 380 million euros),issued in 2006 at par, bearing annual interest at 7.125% and repayable in 2014.

– Bonds issued by Case New Holland Inc. in 2003 (bearing coupon interest at 9.25% and repayable on August 1, 2011 for anamount of 1,050 million U.S. dollars, equivalent to 797 million euros) and in 2004 (bearing coupon interest at 6.00% andrepayable on June 1, 2009 for an amount of 500 million U.S. dollars, equivalent to 380 million euros); the bond indenturecontains a series of financial covenants that are common to the high yield American bond market.

– Bonds issued by CNH America LLC and CNH Capital America for a total amount outstanding of 381 million U.S. dollars,equivalent to 289 million euros.

In 2006, the increases in the item Bonds arising from the new issues made by Fiat Finance and Trade Ltd. and CNH Inc. have beenpartially offset by the repayment at maturity of previous bonds, in particular those issued by Fiat Finance and Trade Ltd. (2,243million euros), and Fiat Finance Canada (100 million euros), as part of the Global Medium Term Note Programme.

The unaudited prospectuses and offering circulars, or their abstracts, relating to these principal bond issues are available on theGroup’s website at www.fiatgroup.com under “Shareholders and Investors – Financial Publications”.

The majority of the bonds issued by the Group contain commitments (“covenants”) by the issuer and in some cases by Fiat S.p.A.as the guarantor, that are common in international practice for bond issues of this type, by issuers in the same industrial segmentas that in which the Group operates. In particular, these covenants may include (i) a negative pledge clause which requires that thebenefit of any real present or future guarantees given as collateral on the assets of the issuer and/or Fiat, on other bonds and othercredit instruments should be extended to these bonds to the same degree, (ii) a pari passu clause, on the basis of whichobligations cannot be undertaken which are senior to the bonds issued, (iii) an obligation to provide periodic disclosure, (iv) forcertain of the bond issues cross-default clauses, whereby the bonds become immediately due and payable when certain defaultsarise in respect of other financial instruments issued by the Group and (v) other clauses generally present in issues of this type.

n Commercial risks - This provision includes the amount of obligations arising in connection with the sale of products and servicessuch as extended warranty agreements and maintenance contracts. An accrual is recorded when the expected costs to completethe services under these contracts exceed the revenues expected to be realised.

This provision also includes management’s best estimate of the costs that are expected to be incurred in connection with productdefects that could result in a larger recall of vehicles. This provision for risks is developed through an assessment of reporteddamages or returns on a case-by-case basis.

n Environmental risks - Based upon currently available information, the reserve represents management’s best estimate of theGroup’s potential environmental obligations. Amounts included in the estimate comprise direct costs to be incurred in connectionwith environmental obligations associated with current or formerly owned facilities and sites. This provision also includes costsrelated to claims on environmental matters.

n Indemnities - The reserve for indemnities relates to contractual indemnities provided by the Group in connection with significantdivestitures carried out in 2006 and prior years. These liabilities primarily arise from indemnities relating to contingent liabilities inexistence at the time of the sale, as well as those covering any breach of the representations and warranties provided in thecontract and, in certain instances, environmental or tax matters. These provisions were determined estimating the amount of theexpected outflow of resources, taking into consideration the relevant level of probability of occurrence.

28. DebtA breakdown of debt and an analysis by due date are as follows:




Asset-backed financing 4,542 3,767 35 8,344 7,426 3,254 49 10,729Other debt:- Bonds 547 5,160 1,590 7,297 2,766 2,307 2,561 7,634- Borrowings from banks 1,590 1,609 150 3,349 2,358 2,557 128 5,043- Loans for banking activities – – – – 1,255 – – 1,255- Payables represented by securities 282 33 – 315 392 – – 392- Other 656 173 54 883 564 92 52 708Total Other debt 3,075 6,975 1,794 11,844 7,335 4,956 2,741 15,032Total Debt 7,617 10,742 1,829 20,188 14,761 8,210 2,790 25,761

The item Asset-backed financing represents the amount of financing received through both securitisation and factoringtransactions which do not meet IAS 39 derecognition requirements and is recognised as an asset in the balance sheet under theitem Current receivables (Note 19).

The bonds issued by the Fiat Group are governed by different terms and conditions according to their type as follows:


The above-mentioned bonds issued by CNH Inc. contain, moreover, financial covenants common to the high yield American bondmarket which place restrictions, among other things, on the possibility of the issuer and certain companies of the CNH group tosecure new debt, pay dividends or buy back treasury stock, realise certain investments, conclude transactions with associatedcompanies, give collateral on its assets, conclude sale and leaseback transactions, sell certain fixed assets or merge with othercompanies, and financial covenants which impose a maximum limit on further indebtedness by the CNH group companies whichcannot exceed a specific ratio of cash flows to dividend payments and financial expenses. Such covenants are subject to variousexceptions and limitations and, in particular, some of these would no longer be binding should the bonds be assigned aninvestment grade rating by Standard & Poor’s Rating Services and/or Moody’s Investors Service.

The major bond issues outstanding at December 31, 2006 are the following:

Face value of Outstandingoutstanding bonds amount

Currency (in millions) Coupon Maturity (in millions of euros)

Global Medium Term Notes:Fiat Finance & Trade Ltd.(1) EUR 1,000 6.25% February 24, 2010 1,000Fiat Finance & Trade Ltd.(1) EUR 1,300 6.75% May 25, 2011 1,300Fiat Finance & Trade Ltd.(1) EUR 617 (2) (2) 617Fiat Finance & Trade Ltd.(5) EUR 1,000 5.625% November 15, 2011 1,000Others (3) 258Total Global Medium Term Notes 4,175Convertible bonds:Fiat Fin. Luxembourg S.A. (4) USD 17 3.25% January 9, 2007 13Total Convertible bonds 13Other bonds:CNH Capital America LLC USD 127 6.75% October 21, 2007 96Case New Holland Inc. USD 500 6.00% June 1, 2009 380Case New Holland Inc. USD 1,050 9.25% August 1, 2011 797Fiat Finance & Trade Ltd. (5) EUR 1,000 6.625% February 15, 2013 1,000Case New Holland Inc. USD 500 7.125% March 1, 2014 380CNH America LLC USD 254 7.25% January 15, 2016 193Total Other bonds 2,846Hedging effect and amortised cost valuation 263Total Bonds 7,297

(1) Bonds listed on the Mercato Obbligazionario Telematico of the Italian stock exchange (EuroMot). In addition, the majority of the bonds issued by the Fiat Group are also listed on theLuxembourg stock exchange.

(2) “Fiat Step-Up Amortizing 2001-2011” bonds repayable at face value in five equal annual instalments each for 20% of the total issued (617 million euros) due beginning from the sixth year(November 7, 2007) by reducing the face value of each bond outstanding by one-fifth. The last instalment will be repaid on November 7, 2011. The bonds pay coupon interest equal to: 4.40% inthe first year (November 7, 2002), 4.60% in the second year (November 7, 2003), 4.80% in the third year (November 7, 2004), 5.00% in the fourth year (November 7, 2005), 5.20% in the fifth year(November 7, 2006), 5.40% in the sixth year (November 7, 2007), 5.90% in the seventh year (November 7, 2008), 6.40% in the eighth year (November 7, 2009), 6.90% in the ninth year (November7, 2010), 7.40% in the tenth year (November 7, 2011).

(3) Bonds with amounts outstanding equal to or less than the equivalent of 50 million euros.(4) Bonds convertible into General Motors Corporation common stock. (5) Bonds listed on the Irish Stock Exchange

The Fiat Group intends to repay the issued bonds in cash at due date by utilising available liquid resources. At December 31, 2006,the Fiat Group also had unused committed credit lines expiring after 2007 of approximately 2 billion euros.


In addition, the companies in the Fiat Group may from time to time buy back bonds on the market that have been issued by theGroup, also for purposes of their cancellation. Such buy backs, if made, depend upon market conditions, the financial situationof the Group and other factors which could affect such decisions.

The annual interest rates and the nominal currencies of debt are as follows:

Interest rate

less from 5% from 7.5% from 10% greater(in millions of euros) than 5% to 7.5% to 10% to 12.5% than 12.5% Total

Euro 2,714 5,628 271 – 1 8,614U.S. dollar 85 6,886 812 15 1 7,799Brazilian real 175 43 1,211 211 434 2,074British pound 29 49 – – – 78Canadian dollar 12 924 – – – 936Other 76 512 76 14 9 687Total Debt 3,091 14,042 2,370 240 445 20,188

Debt with annual nominal interest rates in excess of 12.5% relate principally to Group’s subsidiaries operating in Brazil.

For further information on the management of interest rate and exchange rate risk reference should be made to the previoussection Risk Management and to Note 34.

The fair value of Debt at December 31, 2006 amounts approximately to 20,484 million euros (approximately 25,624 million eurosat December 31, 2005), determined using the quoted market price of financial instruments, if available, or the related future cashflows. The amount is calculated using the interest rates stated in Note 19, suitably adjusted to take account of the Group’s currentcreditworthiness.

At December 31, 2006 the Group has outstanding financial lease agreements for certain property, plant and equipment whose netcarrying amount totalling 70 million euros (96 million euros at December 31, 2005) is included in the item Property, plant andequipment (Note 14). Payables for finance leases included in the item Other debt amount to 57 million euros at December 31, 2006(145 million euros at December 31, 2005) and are analysed as follows:




Minimum future lease payments 16 39 6 61 79 59 17 155Interest expense (1) (3) – (4) (4) (5) (1) (10)Present value of minimum lease payments 15 36 6 57 75 54 16 145

The significant decrease in finance lease payables is mostly the result of paying the final instalments of 58 million euros in 2006of an agreement for the lease of assets that were fully impaired in prior years.

Debt secured by mortgages on assets of the Group amounts to 190 million euros at December 31, 2006 (710 million eurosat December 31, 2005), of which 57 million euros (145 million euros at December 31, 2005) due to creditors for assets acquiredunder finance leases. The total carrying amount of assets acting as security for loans amounts to 223 million euros at December



The following is reconciliation between Net financial position as presented in the above table and Net debt as presented in theReport on Operations:


Consolidated net debt as presented in the Report on Operations (11,836) (18,523)

Less: Current financial receivables, excluding those due from jointly controlled financialservices companies amounting to 143 million euros at December 31, 2006 11,605 15,973

Net financial position (231) (2,550)

Reference should be made to Notes 19, 21, 22 and 23 and the information provided in Note 28 for a further analysis of the items inthe table.

29. Trade payablesAn analysis by due date of trade payables at December 31, 2006 is as follows:




Trade payables 12,602 1 – 12,603 11,773 4 – 11,777

The carrying amount of Trade payables is considered in line with their fair value at the balance sheet date.

30. Other payablesAn analysis of Other payables at December 31, 2006 and 2005 is as follows:


Current tax payables 311 388

Others:- Payables to personnel 496 483- Tax payables 690 581- Social security payables 341 354- Advances on buy-back agreements 2,370 2,171- Other minor 811 844Total Others 4,708 4,433Total Other payables 5,019 4,821

31, 2006 (872 million euros at December 31, 2005). In addition, it is recalled that the group’s assets include current receivables andset-aside cash to be used for settling asset-backed financing of 8,344 million euros (10,729 million euros at December 31, 2005).

Net financial positionIn compliance with Consob Regulation issued on July 28, 2006 and in conformity CESR’s Recommendations for the consistentimplementation of the European Commission’s Regulation on Prospectuses issued on February 10, 2005, the Net financial positionof the Fiat Group is as follows:


Liquidity (a): 7,965 6,973- Cash and cash equivalents 7,736 6,417- Cash and cash equivalents included as Assets held for sale 5 –- Securities held for trading (Current securities) 224 556

Current financial receivables (Receivables from financing activities) (b): 11,743 15,973- from jointly controlled financial services entities 143 –- from other related parties 48 73- from third parties 11,552 15,900

Current financial receivables included as Assets held for sale (c) 5 –

Other current financial assets (Other financial assets) (d) 382 454

Debt (e): 20,188 25,761- due to related parties 734 365- due to third parties 19,454 25,396

Debt included as Liabilities held for sale (f) 33 –

Other current financial liabilities (Other financial liabilities) (g) 105 189

Net financial position (h) = (a+b+c+d-e-f-g): (231) (2,550)- due to related parties (543) (292)- due to third parties 312 (2,258)

The item Receivables from financing activities includes the entire portfolio of the financial services entities, classified as currentassets as they will be realised during the normal operating cycle of these companies.



consolidated financial statements at December 31, 2005). As described in the section Scope of consolidation, on September 29,2006, Fiat exercised its call option on 28.6% of the shares of Ferrari S.p.A., taking its holding from 56.4% to 85% in this way. Theremaining rights granted by Mediobanca have now ceased. Fiat has a call option exercisable from January 1 to July 31, 2008on a further 5% of the Ferrari shares held by Mubadala Development Company at a pre-determined price of 303 euros per share(amounting to a total of 121.2 million euros) less any dividends that may be distributed.

TeksidTeksid S.p.A. is the object of a put and call agreement with the partner Norsk Hydro concerning the subsidiary Meridian TechnologiesInc. (held 51% by the Teksid group and 49% by the Norsk Hydro group). In particular, should there be a strategic deadlock in themanagement of the company (namely in all those cases in which a unanimous vote in favour is not reached by the directors on theboard as regards certain strategic decisions disciplined by the contract between the stockholders), the following rights would arise:

n Put option of Norsk Hydro with Teksid on the 49% holding: the sale price would be commensurate with the initial investmentmade in 1998, revalued pro rata temporis, net of dividends paid.

n Call option of Teksid with Norsk Hydro on the 49% holding (exercisable whenever Norsk Hydro renounces its right to exercisethe put option described above): the sale price would be the higher value between the initial investment made by Norsk Hydroin 1998, calculated according to the criteria expressed previously, and 140% of the fair market value (in this regard, an increase oftwo percentage points per year is established in the event the option is exercised from the start of 2008 until 2013, thus up to 150%of the relative value).

It should be pointed out that at present the conditions that would give rise to a strategic deadlock are considered to be remote.

On December 6, 2006 Teksid and Norsk Hydro reached an agreement for the sale of their interests in Meridian Technologies Inc.The finalisation of this transaction, subject to the closing of the financing to the purchaser from financial institutions, would leadto the termination of the above-mentioned agreement.

Fiat S.p.A. is subject to a put contract with Renault (in reference to the original investment of 33.5% in Teksid, now 15.2%).

In particular, Renault would acquire the right to exercise a sale option to Fiat on its interest in Teksid, in the following cases:

n in the event of non-fulfilment in the application of the protocol of the agreement and admission to receivership or any otherredressment procedure;

n in the event Renault’s investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside the foundrysector;

n should Fiat be the object of the acquisition of control by another car manufacturer.

The exercise price of the option is established as follows:

n for 6.5% of the capital stock of Teksid, the initial investment price increased by a given interest rate;

n for the remaining amount of capital stock of Teksid, the share of the accounting net equity at the exercise date.

An analysis of Other payables by due date is as follows:




Other payables 4,055 903 61 5,019 3,819 879 123 4,821

The item Advances on buy-back agreements refers to agreements entered into by the Group during the year or which still remaineffective at the balance sheet date. An amount of 1,316 million euros relate to assets included in Property, plant and equipment,with the balance of 1,054 million euros relating to inventories.

The item Advances on buy-back agreements represents the following:

n at the date of the sale, the price received for the product is recognised as an advance in liabilities;

n subsequently, since the difference between the original sales price and the repurchase price is recognised in the incomestatement as operating lease instalments on a straight line basis over the lease term, the balance represents the remaining leaseinstalments yet to be recognised in income plus the repurchase price.

The carrying amount of Other payables is considered in line with their fair value at the balance sheet date.

31. Accrued liabilities and deferred incomeThe item Accrued liabilities and deferred income includes public grants recognised as income over the useful lives of the assets towhich they relate. Furthermore, the item comprises deferred income relating to service contracts, as well as accrued liabilities forcosts that will be settled in the following year.

32. Guarantees granted, commitments and contingent liabilities

Guarantees grantedAt December 31, 2006, the Group had granted guarantees on the debt or commitments of third parties or associated entitiestotalling 726 million euros (1,198 million euros at December 31, 2005). An amount of 364 million euros of the decrease of 472million euros is due to lower guarantees granted on behalf of Sava S.p.A. for the bonds it has issued.

Other commitments and important contractual rights The Fiat Group has important commitments and rights deriving from outstanding agreements, summarised in the following.

FerrariAs part of the agreement signed in 2002 for the acquisition by Mediobanca S.p.A. of 34% of the capital stock of Ferrari S.p.A., Fiatwas granted a series of rights by the purchaser which included a call option (further details of this are provided in Note 32 to the



Furthermore, in connection with significant asset divestitures carried out in 2006 and in prior years, the Group providedindemnities to purchasers with the maximum amount of potential liability under these contracts generally capped at a percentageof the purchase price. These liabilities primarily relate to potential liabilities arising from breach of representations and warrantiesprovided in the contracts and, in certain instances, environmental or tax matters, generally for a limited period of time. AtDecember 31, 2006, potential obligations with respect to these indemnities are approximately 860 million euros (approximately 833million euros at December 31, 2005), against which provisions of 49 million euros (87 million euros December 31, 2005) have beenmade, classified as Other provisions. The Group has provided certain other indemnifications that do not limit potential payment;it is not possible to estimate a maximum amount of potential future payments that could result from claims made under theseindemnities.

In February 2006, Fiat has received a subpoena from the SEC Division of Enforcement regarding a formal investigation entitled“In the Matter of Certain Participants in the Oil-for-Food Program”. Under this subpoena, the Group is required to provide the SECwith documents relating to certain Fiat-related entities, including certain CNH subsidiaries and Iveco, regarding matters relating tothe United Nations Oil-for-Food Program. A substantial number of companies was mentioned in the “Report of the IndependentInquiry Committee into the United Nations Oil-for-Food Program”, which alleged that these companies engaged in transactionsunder this programme that involved inappropriate payments. Management is currently unable to predict what actions, if any, mayresult from the SEC investigation.

33. Segment reportingInformation by business and geographical area is disclosed in accordance with IAS 14 – Segment reporting, and is prepared inconformity with the accounting policies adopted for preparing and presenting the Consolidated financial statements of the Group.The primary reporting format is by business segment, while geographical segments represent the secondary reporting format.This decision is based on the identification of the source and nature of the Group’s risks and returns, which determine how theGroup is organised and define its management structure and its internal financial reporting system.

Business segment informationThe internal organisation and management structure of the Fiat Group throughout the world are based on the business segment towhich entities and divisions belong. In addition, the Group has investments in holding entities and service providers whose activityis different from those of the industrial businesses. The following descriptions provide additional detail of this.

The Fiat Auto Sector operates internationally with the major brands Fiat, Lancia, Alfa Romeo and Fiat Light Commercial Vehicles,and manufactures and markets automobiles and commercial vehicles. It also provides financial services through the Fiat AutoFinancial Services joint venture with the Crédit Agricole group.

The Maserati Sector produces and markets luxury sports cars with the brand Maserati.

The Ferrari Sector consists of the manufacturing and marketing of luxury sports cars with the brand Ferrari and the managementof the Formula One racing cars.

The Agricultural and Construction Equipment (CNH) Sector manufactures and sells tractors and Agricultural equipment under theCaseIH and the New Holland brands and Construction equipment under the Case and New Holland brands. The Sector alsoprovides financial services to its end customers and dealers.

Fidis Retail Italia (FRI)All the rights of and commitments to Synesis Finanziaria S.p.A. (the company that held 51% of Fidis Retail Italia S.p.A.) describedin Note 32 to the consolidated financial statements at December 31, 2005 terminated when Fiat exercised its call option onDecember 28, 2006 on establishing the FAFS joint venture with Crédit Agricole.

Sales of receivablesThe Group has discounted receivables and bills without recourse having due dates after December 31, 2006 amounting to 5,697 millioneuros (2,463 million euros at December 31, 2005, with due dates after that date), which refer to trade receivables and other receivablesfor 4,489 million euros (2,007 million euros at December 31, 2005) and receivables from financing for 1,208 million euros (456 millioneuros at December 31, 2005). These amounts include receivables, mainly from the sales network, sold to jointly-controlled financialservices companies (FAFS) for 3,400 million euros and associated financial service companies (Iveco Financial Services, controlled byBarclays) for 661 million euros (710 million euros at December 31, 2005). The increase recorded during 2006 is due to thedeconsolidation of the financial services companies of Fiat Auto conveyed in the above mentioned joint venture with Crédit Agricole.

Operating lease contractsThe Group enters into operating lease contracts for the right to use industrial buildings and equipments with an average term of10-20 years and 3-5 years, respectively, At December 31, 2006, the total future minimum lease payments under non-cancellablelease contracts are as follows:




Future minimum lease payments underoperating lease agreements 82 172 180 434 71 171 161 403

During 2006, the Group has recorded costs for lease payments for 71 million euros (69 million euros during 2005).

Contingent liabilitiesAs a global company with a diverse business portfolio, the Fiat Group is exposed to numerous legal risks, particularly in the areasof product liability, competition and antitrust law, environmental risks and tax matters. The outcome of any current or futureproceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that arenot covered, or fully covered, by insurers’ compensation payments and could affect the Group financial position and results. AtDecember 31, 2006, contingent liabilities estimated by the Group amount to approximately 220 million euros (approximately 200million euros at December 31, 2005), for which no provisions have been recognised since an outflow of resources is not consideredto be probable. Furthermore, contingent assets and expected reimbursement in connection with these contingent liabilities forapproximately 30 million euros have been estimated but not recognised.

Instead, when it is probable that an outflow of resources embodying economic benefits will be required to settle obligations andthis amount can be reliably estimated, the Group recognises specific provision for this purpose.



As the Sector Result includes Interest income and other financial income and Interest expenses and other financial expenses offinancial services companies, the Assets of the Fiat Auto, CNH and Iveco Sectors include financial assets (primarily the investmentportfolio) of financial services companies; similarly Sector Liabilities include the debt of financial services companies. As a result,the unallocated Group debt represents the debt of the industrial companies.

Other andMagneti Business elimina- FIAT

(in millions of euros) Fiat Auto Maserati Ferrari CNH Iveco FPT Marelli Teksid Comau Solutions Itedi tions Group

2006Total net revenues 23,702 519 1,447 10,527 9,136 6,145 4,455 979 1,280 668 401 (7,427) 51,832Net revenuesintersegment (247) (13) (77) (2) (106) (4,558) (1,678) (225) (332) (453) (9) 7,700 –Net revenues from third parties 23,455 506 1,370 10,525 9,030 1,587 2,777 754 948 215 392 273 51,832Trading profit 291 (33) 183 737 546 168 190 56 (66) 37 11 (169) 1,951Unusual income(expenses) 436 – – (145) 19 (66) (15) (30) (206) (9) 1 125 110Operating result 727 (33) 183 592 565 102 175 26 (272) 28 12 (44) 2,061Financial income(expenses) (576)Unusual financial income –Result from investments 37 – – 45 32 1 (1) 3 (3) – – 42 156Result before taxes 1,641Income taxes 490Result from continuingoperations 1,151

Other informationCapital expenditure 2,163 82 142 394 865 254 293 32 56 10 45 (24) 4,312Depreciation and amortisation (1,538) (30) (145) (293) (421) (402) (201) (38) (23) (13) (7) (10) (3,121)Impairment (2) – – – (36) (7) (12) (23) (26) – – – (106)Other non-cash items (1,037) (60) (35) (1,504) (507) (105) (73) (19) (85) (17) (1) (91) (3,534)

The Iveco Sector produces and sells trucks and commercial vehicles, mainly in Europe, (under the Iveco brand), buses (under theIrisbus brands) and special vehicles (under the Iveco, Magirus and Astra brands). In addition, Iveco provides financial services toits customers and dealers mainly through Iveco Finance Holdings Ltd., a company 51% owned by the Barclays group and 49% byIveco.

The Fiat Powertrain Technologies (FPT) Sector manufactures car engines and transmissions (these businesses were managed bythe Fiat-GM Powertrain joint venture until April 2005). Starting from 2006 the Sector also includes Iveco and C.R.F. powertrainactivities.

The Components Sector (Magneti Marelli) produces and sells components for lighting systems, engine control units, suspensionand shock absorbers systems, electronic systems and exhaust systems.

The Metallurgical Products Sector (Teksid) produces components for engines, cast-iron components for transmissions gearboxesand suspensions, and magnesium bodywork components.

The Production System Sector (Comau) designs and produces industrial automation systems and related products for theautomotive industry.

The Services Sector (Business Solutions) provides accounting and human resources services, almost all of which are supplied toother Group companies.

The activities of the Publishing and Communications Sector (Itedi) mainly include publishing the newspaper La Stampa and sellingadvertising space in the print, television and internet media.

Total Net revenues presented by each Sector includes transactions with other Sectors carried out at arm’s length prices.

Intersegment revenues and expenses are reconciled and are eliminated in the consolidated financial statements of the Group;intersegment receivables and payables are eliminated in a similar manner.

The item Segment Capital expenditure, Depreciation and amortisation, and Impairment concern intangible assets and property,plant and equipment.

Other Sector non-cash items comprise the Other provision for risks and charges.

The “Segment Result” arising under IAS 14 is equal to the Operating result. The Operating result and Trading profit include,respectively, Interest income and other financial income and Interest expenses and other financial expenses of financial servicescompanies in Net revenues and Cost of Sales of the Sector.

Sector Assets are operating assets used by the Sector in its business and are directly attributed or allocated, in a reasonablemanner, to the Sector. These assets do not include tax assets and investments accounted for using the equity method.

Sector Liabilities are operating liabilities used by the Sector in its business and are directly attributed or allocated, in a reasonablemanner, to the Sector. These liabilities do not include tax liabilities.





At December 31, 2006Sector operating assets 12,920 300 918 17,727 6,125 4,103 2,294 424 933 103 243 (514) 45,576Sector operatingassets held-for-sale 28 – – 29 6 – – 192 – 125 – (68) 312Investments 1,131 – 3 347 426 18 16 17 3 1 11 105 2,078UnallocatedGroup assets:- Tax assets 2,675- Receivables from

financing activities,Non-current Otherreceivables andSecurities of industrialcompanies 450

- Cash and cashequivalents, Currentsecurities and Otherfinancial assets ofindustrial companies 7,212

Total unallocatedGroup assets 10,337Total assets 58,303Sector operatingliabilities 12,396 367 634 14,653 5,784 2,444 1,625 292 712 213 188 (1,226) 38,082Sector operatingliabilities held-for-sale 50 – – – – – – 73 – 147 – (1) 269Provision for investments 19 – – – 39 3 4 – 2 – – – 67UnallocatedGroup liabilities:- Tax liabilities 864- Debt and Other financial

liabilities of industrialcompanies net of Currentfinancial receivablesfrom jointly controlledfinancial services entities 8,985

Total unallocatedGroup liabilities 9,849Total liabilities 48,267



2005Total net revenues 19,533 533 1,289 10,212 8,483 4,520 4,033 1,036 1,573 752 397 (5,817) 46,544Net revenuesintersegment (194) – (83) (3) (386) (3,030) (1,473) (206) (245) (422) (10) 6,052 –Net revenues fromthird parties 19,339 533 1,206 10,209 8,097 1,490 2,560 830 1,328 330 387 235 46,544Trading profit (281) (85) 157 698 332 109 162 45 42 35 16 (230) 1,000Unusual income(expenses) (537) – – (87) (120) (28) (35) (18) (50) (28) (3) 2,121 1,215Operating result (818) (85) 157 611 212 81 127 27 (8) 7 13 1,891 2,215Financial income(expenses) (843)Unusual financial income 858Result from investments 68 – – 39 (50) (3) (3) 1 (3) (20) – 5 34Result before taxes 2,264Income taxes 844Result from continuingoperations 1,420

Other informationCapital expenditure 1,582 20 142 255 789 296 313 45 38 19 20 1 3,520Depreciation andamortisation (1,264) (37) (128) (296) (396) (310) (181) (45) (27) (28) (7) (21) (2,740)Impairment (151) – – – (36) (1) (16) – – (3) – (26) (233)Other non-cash items (1,259) (34) (52) (1,311) (591) (91) (102) (44) (53) (25) (1) (166) (3,729)


Geographical segment informationThe following geographical segment information on Net Revenues is based on the geographical location of the Group’s customers:


Italy 14,851 13,078Europe (Italy excluded) 20,298 18,518North America 6,315 6,048Mercosur 5,416 4,364Other areas 4,952 4,536Net revenues of the Group 51,832 46,544

The total amount of assets and capital expenditure by geographical segment are as follows:


(in millions of euros) Assets Capital expenditure Assets Capital expenditure

Italy 24,351 2,534 24,737 2,075Europe (Italy excluded) 12,918 1,110 15,908 1,011North America 13,396 321 15,599 165Mercosur 5,581 299 4,085 164Other areas 2,057 48 2,125 105Total 58,303 4,312 62,454 3,520

34. Information on financial risksThe Group is exposed to the following financial risks connected with its operations:

n credit risk, regarding its normal business relations with customers and dealers, and its financing activities;

n liquidity risk, with particular reference to the availability of funds and access to the credit market and to financial instrumentsin general;

n market risk (principally relating to exchange rates, interest rates), since the Group operates at an international level in differentcurrencies and uses financial instruments which generate interest. The Group is also exposed to the risk of changes in the priceof certain listed shares.

As described in the section “Risk management”, the Fiat Group constantly monitors the financial risks to which it is exposed,in order to detect those risks in advance and take the necessary action to mitigate them.

The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the Group.

The quantitative data reported in the following do not have any value of a prospective nature, in particular the sensitivity analysison market risks is unable to reflect the complexity of the market and its related reaction which may result from every change whichmay occur.




At December 31, 2005Sector operating assets 16,226 235 936 17,828 6,033 4,220 2,363 671 1,091 228 186 534 50,551Sector operatingassets held-for-sale 5 – – 32 – – – – – 113 – – 150Investments 1,780 1 3 385 487 17 13 13 5 1 12 (627) 2,090UnallocatedGroup assets:- Tax assets 2,882- Receivables from

financing activities,Non-current Otherreceivables andSecurities of industrialcompanies 632

- Cash and cashequivalents, Currentsecurities and Otherfinancial assets ofindustrial companies 6,149

Total unallocatedGroup assets 9,663Total assets 62,454Sector operatingliabilities: 15,638 270 625 14,483 5,591 2,258 1,620 419 828 327 161 338 42,558Sector operatingliabilities held-for-sale – – – – – – – – – 110 – – 110Provision for investments 21 – – – 43 3 2 – 2 – – – 71UnallocatedGroup liabilities:- Tax liabilities 934- Debt and Other financial

liabilities ofindustrial companies 9,368

Total unallocatedGroup liabilities 10,302Total liabilities 53,041



Liquidity riskLiquidity risk arises if the Group is unable to obtain under economic conditions the funds needed to carry out its operations.

The two main factors that determine the Group’s liquidity situation are on one side the funds generated by or used in operatingand investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employedand market terms and conditions.

As described in the Risk management section, the Group has adopted a series of policies and procedures whose purpose is tooptimise the management of funds and to reduce the liquidity risk, as follows:

n centralising the management of receipts and payments, where it may be economical in the context of the local civil, currencyand fiscal regulations of the countries in which the Group is present;

n maintaining an adequate level of available liquidity;

n diversifying the means by which funds are obtained and maintaining a continuous and active presence on the capital markets;

n obtaining adequate credit lines; and

n monitoring future liquidity on the basis of business planning.

Details as to the repayment structure of the Group’s financial assets and debt are provided in Notes 19 and 28, which are entitledrespectively Current receivables and Debt.

Management believes that the funds and credit lines currently available, in addition to those funds that will be generatedfrom operating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activitiesand its working capital needs and to fulfil its obligations to repay its debts at their natural due date.

Exchange rate riskThe group is exposed to risk resulting from changes in exchange rates, which can affect its result and its equity. In particular:

n Where a Group company incurs costs in a currency different from that of its revenues, any change in exchange rates can affectthe operating result of that company.

In 2006, the total trade flows exposed to exchange rate risk amounted to the equivalent of 13% of the Group’s turnover (14% in 2005).

The principal exchange rates to which the Group is exposed are the following:

– EUR/USD, relating to sales in dollars made by Italian companies (in particular Ferrari and Maserati) to the North American market andto other markets in which the dollar is the trading currency, and to the production and purchases of the CNH Sector in the Euro area;

– EUR/GBP, principally in relation to sales by Fiat Auto and Iveco on the UK market;

Credit riskThe maximum credit risk to which the Group is theoretically exposed at December 31, 2006 is represented by the carrying amountsstated for financial assets in the balance sheet and the nominal value of the guarantees provided on liabilities or commitmentsto third parties as discussed in Note 32.

Dealers and final customers are subject to specific assessments of their creditworthiness under a detailed scoring system;in addition to carrying out this screening process, the Group also obtains financial and non-financial guarantees for credit grantedfor the sale of cars, commercial vehicles and agricultural and construction equipment. These guarantees are further strengthenedby reserve of title clauses on financed vehicle sales to the sales network and on vehicles assigned under finance leasingagreements.

Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if theyare individually significant. The amount of the write-down takes into account an estimate of the recoverable cash flows and thedate of receipt, the costs of recovery and the fair value of any guarantees received. General provisions are made for receivableswhich are not written down on a specific basis, determined on the basis of historical experience and statistical information.

Out of Receivables for financing activities amounting to 11,743 million euros at December 31, 2006 (15,973 million eurosat December 31, 2005), balances totalling 159 million euros (205 million euros at December 31, 2005) have been written down onan individual basis. Of the remainder, balances totalling 93 million euros (226 million euros at December 31, 2005) are past due upto one month, while balances totalling 360 million euros are past due by more than one month (408 million euros at December 31,2005). In the event of instalment payments, even if only one instalment is overdue, the whole amount of the receivable is classifiedas such.

Out of Trade receivables and Other receivables totalling 7,783 million euros at December 31, 2006 (8,053 million euros at December31, 2005), balances totalling 118 million euros (119 million euros at December 31, 2005) have been written down on an individualbasis. Of the remainder, balances totalling 406 million euros (400 million euros at December 31, 2005) are past due up to onemonth, while balances totalling 554 million euros (613 million euros at December 31, 2005) are past due by more than one month.

The decrease in overdue balances is partly the result of the reduction in the portfolio as a consequence of the deconsolidationof he companies whose operations were transferred to the FAFS joint venture and is partly the effect of the steps taken duringthe year to collect these balances.

CNH Financial Services in Brazil (“Banco CNH”) participates in various agricultural development/subsidy programs of the Braziliangovernment, provided through the Banco Nacional de Desenvolvimento Economico e Social (“BNDES”). Under such programsBNDES provides credit lines to Banco CNH, at subsidized interest rates, such that Banco CNH can provide subsidized financingto farmers for purchases of agricultural equipment. Because of the severe regional droughts and low local agricultural commodityprices in Brazil, the Brazilian government granted a payment moratorium to certain of the farmers in the worst affected areas.Under this industry wide payment moratorium program, the government rescheduled out the full remaining value of the affectedoutstanding financing by one additional year and rescheduled the maturity and payments due on the credit lines provided to BancoCNH, and all other financial services participants in the program, by the same amount. The total remaining value of theoutstanding financings and credit lines in 2006 that was rescheduled, was approximately 2.3 billion Reais (0.8 billion euros).In addition, Banco CNH increased its credit loss provisions during the year, to provision for lower equipment residual valuesover the longer loan amortization period.



There have been no substantial changes in 2006 in the nature or structure of exposure to exchange rate risk or in the Group’shedging policies.

Sensitivity analysisThe potential loss in fair value of derivative financial instruments held by the Group at December 31, 2006 for managing exchangerisk (currency swaps/forward, currency options and interest rate and currency swaps), which would arise in the case of ahypothetical, unfavourable and instantaneous change of 10% in the exchange rates of the major foreign currencies with the Euro,amounts to approximately 460 million euros (273 million euros at December 31, 2005). The valuation model for currency optionsassumes that market volatility at year end remains unchanged. Receivables, payables and future trade flows whose hedgingtransactions have been analysed were not considered in this analysis. It is reasonable to assume that changes in exchange rateswill produce the opposite effect, of an equal or greater amount, on the underlying transactions that have been hedged. Theincrease over the prior year is the result of an increase in the hedging of the Group’s main exposures and of an extension of itshedging policy to certain entities operating in emerging countries.

Interest rate riskThe manufacturing companies and treasuries of the Group make use of external funds obtained in the form of financing and investin monetary and financial market instruments. In addition, Group companies make sales of receivables resulting from their tradingactivities on a continuing basis. Changes in market interest rates can affect the cost of the various forms of financing, includingthe sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financialexpenses incurred by the Group.

In addition, the financial services companies provide loans (mainly to customers and dealers), financing themselves using variousforms of direct debt or asset-backed financing (e.g. securitisation of receivables). Where the characteristics of the variabilityof the interest rate applied to loans granted differ from those of the variability of the cost of the financing obtained, changesin the current level of interest rates can influence the operating result of those companies and the Group as a whole.

In order to manage these risks, the Group uses interest rate derivative financial instruments, mainly interest rate swaps andforward rate agreements, with the object of mitigating, under economically acceptable conditions, the potential variabilityof interest rates on the net result.

Sensitivity analysisIn assessing the potential impact of changes in interest rates, the Group separates out fixed rate financial instruments (for whichthe impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in termsof cash flows).

The fixed rate financial instruments used by the Group consist principally of part of the portfolio of the financial servicescompanies (basically customer financing and financial leases) and part of debt (including subsidised loans and bonds).

The potential loss in fair value of fixed rate financial instruments (including the effect of interest rate derivative financialinstruments) held at December 31, 2006, resulting from a hypothetical, unfavourable and instantaneous change of 10% in marketinterest rates, would have been approximately 105 million euros (33 million euros at December 31, 2005).

– EUR/PLN, relating to local costs incurred in Poland regarding products sold in the Euro area;

– USD/BRL and EUR/BRL, relating to Brazilian manufacturing operations and the related import and export flows, for whichthe company is a net exporter in US dollars;

– USD/CAD, relating to the sales made by the CNH Sector to the Canadian market.

The trading flows exposed to changes in these exchange rates amounted in 2006 to about 82% of the total exchange rate riskfrom trading transactions (79% in 2005).

Other significant exposures regard the exchange rates EUR/CHF, EUR/TRY, AUD/USD, GBP/USD and USD/JPY. None of theseexposures, taken individually, exceeded 5% of the Group’s total transaction exchange risk exposure in 2006.

It is the Group’s policy to use derivative financial instruments to hedge a certain percentage, on average between 55% and 85%,of the trading transaction exchange risk exposure forecast for the coming 12 months (including such risk beyond that date where itis believed to be appropriate in relation to the characteristics of the business) and to hedge completely the exposure resulting fromfirm commitments.

n Group companies may find themselves with trade receivables or payables denominated in a currency different from the moneyof account of the company itself. In addition, in a limited number of cases, it may be convenient from an economic point of viewor it may be required under local market conditions, for companies to obtain finance or use funds in a currency different fromthe money of account. Changes in exchange rates may result in exchange gains or losses arising from these situations.

It is the Group’s policy to hedge fully, whenever possible, the exposure resulting from receivables, payables and securitiesdenominated in foreign currencies different from the company’s money of account.

n Certain of the Group’s subsidiaries are located in countries which are not members of the European monetary union, in particularthe United States, Canada, United Kingdom, Switzerland, Brazil, Poland, Turkey, India, China, Argentina and South Africa. As theGroup’s reference currency is the Euro, the income statements of those countries are converted into euros using the averageexchange rate for the period, and while revenues and margins are unchanged in local currency, changes in exchange rates maylead to effects on the converted balances of revenues, costs and the result in Euros.

n The assets and liabilities of consolidated companies whose money of account is different from the euros may acquire convertedvalues in euros which differ as a function of the variations in exchange rates. The effects of these changes are recognised directlyin the item “Cumulative translation differences” included in stockholders’ equity (see Note 25).

The Group monitors its principal exposure to conversion exchange risk, although there was no specific hedging in this respectat the balance sheet date.



The effects of such transactions on the consolidated income statements for 2006 and 2005 are as follows:

of which: with related parties

JointlyUnconsolidated controlled Associated Other related Total related Effect on

(in millions of euros) Total 2006 subsidiaries entities companies parties parties Total (%)

Net revenues 51,832 17 1,767 402 3 2,189 4.2%Cost of sales 43,888 – 3,037 – 14 3,051 7.0%Selling, general and administrative costs 4,697 – 2 – 1 3 0.1%


JointlyUnconsolidated controlled Associated Other related Total related Effect on

(in millions of euros) Total 2005 subsidiaries entities companies parties parties Total (%)

Net revenues 46,544 15 1,574 277 4 1,870 4.0%Cost of sales 39,624 – 2,188 – 13 2,201 5.6%Selling, general and administrative costs 4,513 – – 3 1 4 0.1%

The effects on the consolidated balance sheets at December 31, 2006 and 2005 are as follows:


JointlyAt December Unconsolidated controlled Associated Other related Total related Effect on

(in millions of euros) 31, 2006 subsidiaries entities companies parties parties Total (%)

Other investments and financial assets 561 23 – 35 – 58 10.3%Inventories 8,447 – 24 – – 24 0.3%Trade receivables 4,944 18 280 78 1 377 7.6%Receivables from financing activities 11,743 13 174 4 – 191 1.6%Other current receivables 2,839 13 129 3 – 145 5.1%Cash and cash equivalents 7,736 – – – – – 0.0%Asset-backed financing 8,344 – 124 272 – 396 4.7%Other debt 11,844 40 266 32 – 338 2.9%Trade payables 12,603 3 947 55 – 1,005 8.0%Other payables 5,019 1 44 – – 45 0.9%

The increase over the prior year reflects the greater weight of the fixed rate loans component, influenced in particular by the bondsissued by the Group during the year.

Floating rate financial instruments include principally cash and cash equivalents, loans provided by the financial servicescompanies to the sales network and part of debt. The effect of the sale of receivables is also considered in the sensitivity analysisas well as the effect of hedging derivative instruments.

A hypothetical, unfavourable and instantaneous change of 10% in short-term interest rates at December 31, 2006, appliedto floating rate financial assets and liabilities, operations for the sale of receivables and derivatives financial instruments,would have caused increased net expenses before taxes, on an annual basis, of approximately 11 million euros (17 millioneuros at December 31, 2005).

This analysis is based on the assumption that there is a general and instantaneous change of 10% in interest rates acrosshomogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets andliabilities are denominated.

Other risks on derivative financial instrumentsAs described in Note 22, the Group holds certain derivative financial instruments whose value is linked to the price of listed sharesand stock market indices (principally Equity swaps on Fiat shares).Although theses transactions were entered into for hedging purposes, they do not qualify for hedge accounting under IFRS.As a consequence, the variability of the underlying values could have an effect on the Group’s results.

Sensitivity analysisThe potential loss in fair value of derivative financial instruments held by the Group at December 31, 2006, in the eventof a hypothetical, unfavourable and instantaneous change of 10% in the price of the underlying values would be approximately40 million euros (8 million euros at December 31, 2005). The increase over 2005 is the result of new agreements entered duringthe year and the rise in the value of the Fiat shares.

35. Related party transactionsThe Fiat Group engages in transactions with unconsolidated subsidiaries, jointly controlled entities, associated companies andother related parties on commercial terms that are normal in the respective markets, considering the quality of the goods orservices involved.



FAFS 46 –Tofas-Turk Otomobil Fabrikasi Tofas A.S. 82 44Società Europea Veicoli Leggeri-Sevel S.p.A. 110 35Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme 1 1Other minor amounts 41 21Total Current trade receivables due from jointly controlled entities 280 101

n Current receivables from financing activities of 174 million euros (8 million euros at December 31, 2005): these relate toreceivables resulting from financial activities carried out by the Group with jointly controlled entities (Sevel) and receivables of 143million euros at December 31, 2006 from jointly controlled financial service companies (FAFS) resulting from the financing of thesales network.

n Other current receivables of 129 million euros (17 million euros at December 31, 2005): these relate mostly to other receivablesof 113 million euros due from FAFS of which 98 million euros relate to the extended term consideration due in connection with thetransaction by which the joint venture was established.

n Asset-backed financing of 124 million euros (nil at 31 December 31, 2005): these relate to amounts due to FAFS for salesof receivables which do not qualify as sales under IAS 39.

n Other financial payables of 266 million euros (51 million euros at December 31, 2005): this item includes 243 million eurosof other payables of a financial nature due to FAFS.

n Trade payables: these relate to payables resulting from the costs discussed above and, starting from December 2006, thosearising from the Group’s trade relationships with FAFS. In particular:


Tofas-Turk Otomobil Fabrikasi Tofas A.S. 152 124Società Europea Veicoli Leggeri-Sevel S.p.A. 655 372Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme 56 74FAFS 76 –Other minor amounts 8 9Total Trade payables due to jointly controlled entities 947 579

Transactions with associated companiesThe principal transactions are as follows:

n Revenues: transactions consist principally of the sales of motor vehicles, production systems and components, including enginesand gearboxes, and the provision of services, to the following companies:


Iveco Finance Holdings Ltd. (a subsidiary of the Barclays group), for the saleof industrial vehicles leased out by the associate 225 150Otoyol Sanayi A.S., for the sale of industrial vehicles 72 49Other minor amounts 105 78Total Revenues from associated companies 402 277



JointlyAt December Unconsolidated controlled Associated Other related Total related Effect on

(in millions of euros) 31, 2005 Subsidiaries entities companies parties parties Total (%)

Other investments and financial assets 571 11 – 68 – 79 13.8%Inventories 7,881 – 38 – – 38 0.5%Trade receivables 4,969 15 101 87 – 203 4.1%Receivables from financing activities 15,973 60 8 5 – 73 0.5%Other current receivables 3,084 13 17 4 – 34 1.1%Cash and cash equivalents 6,417 – – 2 – 2 0.0%Asset-backed financing 10,729 – – 212 – 212 2.0%Other debt 15,032 35 51 67 – 153 1.0%Trade payables 11,777 16 579 26 – 621 5.3%Other payables 4,821 1 38 2 – 41 0.9%

Transactions with jointly controlled entities Significant transactions with jointly controlled entities are set out as follows:

n Net revenues: transactions consist principally of the sales of motor vehicles, production systems and components, includingengines and gearboxes, and the provision of services, to the following companies:


Tofas-Turk Otomobil Fabrikasi Tofas A.S., for the sale of motor vehicles 820 681Società Europea Veicoli Leggeri-Sevel S.p.A., for the sale of engines, other componentsand production systems 607 650Iveco Fiat-Oto Melara Società consortile, for the sale of vehicles and special transport 108 115Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme, for the sale ofengines and other components and production systems 74 41New Holland Trakmak Traktor A.S., for the sale of Agricultural and construction equipment 36 30New Holland HFT Japan Inc., for the sale of Agricultural and construction equipment 26 27Other minor amounts 96 30Total Net revenues from jointly controlled entities 1,767 1,574

n Cost of sales: transactions have taken place principally with the following companies:


Tofas-Turk Otomobil Fabrikasi Tofas A.S., for the purchase of motor vehicles 804 540Società Europea Veicoli Leggeri-Sevel S.p.A., for the purchase of motor vehicles 1,191 1,042Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme, for the purchase of motor vehicles 378 431Other minor amounts 664 175Total Cost of sales for purchases from jointly controlled entities 3,037 2,188

n Current trade receivables: these relate to receivables resulting from the revenues discussed above and, starting from December2006, those arising from the Group’s trade relationships with FAFS, which mostly regard the sales of vehicles leased out by FAFS inits own turn under operating or financial lease arrangements. In particular:



Purchased Cash outflows Goodwill recognised(in millions of euros) minority interest on acquisition at the acquisition date

Conversion of CNH Global N.V. privileged “Series A” shares 6% – –Acquisition of Ferrari newly-issued shares and exercise of thecall option on 28.6% of the Ferrari shares 29% 919 776Total 919 776

In addition, the immaterial subsidiary Ferrari Financial Services AG was acquired in 2006, for a price paid by the Group whichincluded goodwill amounting to 1 million euros. The acquiree’s assets and liabilities at the acquisition date and immediately afterthe acquisition were as follows:

IFRS book value at the IFRS book value immediately(in millions of euros) acquisition date after the acquisition

Non current assets 1 1Current assets 30 30Total assets 31 31Liabilities 31 31Contingent liabilities – –

At the beginning of 2005, Magneti Marelli increased its equity investment in the capital stock of the automotive light manufacturerMako Elektrik Sanayi Ve Ticaret A.S. from 43% to 95%, thus acquiring control from the Turkish group Koç. As a result, the company,previously accounted for using the equity method, has been consolidated on a line-by-line basis from January 1, 2005.This transaction led to the acquisition of already recognised goodwill of 4 million euros from the acquired entity, which was leftunaltered in the consolidated financial statements at December 31, 2005 given the acquiree’s ability to earn a higher rate of returnand the fact that the value of this also stemmed from synergies to be realised after the acquisition as well as from other benefitsexpected to arise from the operation.

The acquiree’s assets and liabilities at the acquisition date and immediately after the acquisition were as follows:

IFRS book value at the IFRS book value immediately(in millions of euros) acquisition date after the acquisition

Non current assets 13 13Current assets 35 35Total assets 48 48Liabilities 25 25Contingent liabilities – –

In 2005 the Group acquired the control of the following previously jointly controlled entities as described below:

n As of May 2005, the operations that had previously been transferred to the Fiat-GM Powertrain joint-venture were consolidatedin Fiat Powertrain Technologies. Fiat re-acquired full control of these operations upon termination of the Master Agreement withGeneral Motors, with the sole exception of the Polish operations that continue to be jointly managed with General Motors. Fiat andGM had formed the JV through the contribution of certain businesses. As part of the agreement to liquidate the JV, Fiat and GM

n Current trade receivables of 78 million euros (87 million euros at December 31, 2005): these relate to receivables resulting fromthe revenues discussed above.

Transactions with other related partiesThe principal transaction in this category relates to an amount of 14 million euros (13 million euros in 2005) classified in costof sales; included in this balance is the purchase of goods of 12 million euros for the high range and de-luxe upholsteryof the Group’s automobiles (12 million euros in 2005) from Poltrona Frau S.p.A., a company listed on the Milan Stock Exchangein which the chairman of the Board of Directors of Fiat S.p.A., Luca Cordero di Montezemolo, has an indirect investment.

Emoluments to Directors, Statutory Auditors and Key ManagementThe fees of the Director and Statutory Auditors of Fiat S.p.A. for carrying out their respective functions, including those in otherconsolidated companies, are as follows:

(in thousands of euros) 2006 2005

Directors 16,006 16,273Statutory auditors 190 177Total Emoluments 16,196 16,450

The aggregate expense incurred in 2006 and accrued at year end for the compensation of executives with strategic responsibilitiesof the Group amounts to approximately 23 million euros. This amount is inclusive of the following:

n the provision charged by the Group in respect of mandatory severance indemnity, amounting to 1 million euros;

n the amount contributed by the Fiat Group to State and employer defined contribution pension funds amounting to approximately4 million euros;

n the amount contributed by the Fiat Group to a special defined benefit plan for certain senior Executives amounting to 0.7 millioneuros.

These costs consist of compensation of 15 million euros for Executives with strategic responsibilities who were already workingfor the Group in 2005 and continue with the Group at present, and 8 million euros for management personnel who took on keyresponsibilities in 2006 and managers who left the Group in the year, including the severance pay of the latter.

36. Acquisitions and Disposals of subsidiaries

AcquisitionsThe Group did not acquire any significant subsidiary in 2006. It acquired instead minority interests in companies in which it alreadyheld control, leading to the recognition of the following cash outflows and goodwill:



Total sales of of whichconsolidated

(in millions of euros) subsidiaries B.U.C. FAFS

Non-current assets 1,586 76 1,453Cash and cash equivalents 653 196 442Other current assets 5,119 1,005 3,957Total assets 7,358 1,277 5,852Debt 6,336 1,074 5,219Other liabilities 590 34 395Total liabilities 6,926 1,108 5,614

The consideration received for these sales of consolidated subsidiaries and the related net cash inflows are as follows:

Total sales of of whichconsolidated

(in millions of euros) subsidiaries B.U.C. FAFS

Consideration received:- Consideration due 593 254 277- Less: Deferred sales proceeds, net (85) – (85)Total Consideration received 508 254 192

Net cash inflows on disposals:- Consideration received 508 254 192- Less: Cash and cash equivalents disposed of (461) (196) (247)Total Net cash inflows on disposals 47 58 (55)

Reimbursement of loans extended by the Group’s centralised cash management 3,131 – 3,131Total Net cash inflows generated 3,178 58 3,076

The consideration received for the sales of other investments and the related net cash inflows are as follows:

Total sales of of which(in millions of euros) other investments FAFS

Total Consideration received 1,157 998- Less: consideration paid for exercising the call option on FRI and the

subsequent capitalisation (659) (659)Total Net cash inflows generated 498 339

It is recalled that during 2005 the Group disposed of the following businesses:

n In the first quarter of 2005, 65% of the investment in the temporary employment agency WorkNet was sold.

n On June 1, 2005, Iveco sold to Barclays Mercantile Business Finance Ltd a 51% stake in Iveco Finance Holdings Limited, acompany comprising certain financial services companies of Iveco operating in France, Germany, Italy, Switzerland and the UnitedKingdom. Since that date the investment in Iveco Finance Holdings Limited is no longer consolidated on a line-by-line basis but isaccounted for using the equity method.

agreed that the businesses formerly contributed by Fiat and GM would be returned to the owner of each respective businessbefore the Master Agreement. The termination agreement stated that each JV partner should receive businesses of equal net assetvalue. Any difference in the net asset value of the businesses returned to GM and Fiat would have resulted in a balancing paymentfrom one JV partner to the other. Consequently the liquidation of the JV had no impact on income or net equity. Fiat subsequentlyconsolidated the net assets it retained, effectively reclassifying the net equity investment in these assets from equity investmentsto consolidated assets and liabilities. The profits of Fiat Powertrain from January 1, 2005 until the acquisition date amounted to 21million euros and this figure is included in the line item Result from investments in the consolidated financial statements of theFiat Group.

n At the end of 2005, the Fiat Group acquired Enel’s share of the joint venture Leasys S.p.A., whose activity is the hire andmanagement of company car fleets, thereby obtaining 100% control. The financial statements of this company have beenconsolidated from December 31, 2005. The loss of Leasys for 2005 included in the line item Result from investments in theconsolidated financial statements of the Fiat Group amounted to 11 million euros. The transaction led to the acquisitionof already recognised goodwill from the acquired entity for an amount of 50 million euros, which was left unaltered in theconsolidated financial statements given the acquiree’s ability to earn a higher rate of return and the fact that the value of this alsostemmed from synergies to be realised after the acquisition as well as from other benefits expected to arise from the operation.

If the acquisition date for these transactions had been January 1, 2005, the revenues and net income for the period would haveincreased by 483 million euros and by 17 million euros, respectively.

DisposalsAs described in the section Scope of consolidation, the Group disposed of the following businesses in 2006:

n The procedure for the sale of the subsidiary Atlanet S.p.A. to the British Telecom group was for the most part finalised in the firstquarter of 2006 on receiving the approval of the Italian Guarantor Authority for Competition and the Market; the transaction wasfinally concluded with the sale of the Polish and Brazilian business in the second half of the year.

n Fiat sold its investment in Sestrieres S.p.A. to Via Lattea S.p.A. on June 29, 2006.

n On August 30, 2006, Teksid S.p.A. sold its holding in Société Bretonne de Fonderie et Mecanique.

n On August 31, 2006, Fiat sold its holding in Banca Unione di Credito (B.U.C.) to BSI (a company of the Generali Group).

n The subsidiary Comau Pico sold its Autodie business to Mbtech Stuttgart on November 10, 2006.

n On December 28, 2006, Fiat Auto and Crédit Agricole finalised the formation of the 50/50 joint venture FAFS.

The book value at the disposal date of the net assets sold is summarised in the following table. Specific disclosure is made for theB.U.C. disposal and the formation of FAFS given the significance of the amounts involved. In particular, disclosures relating to theformation of FAFS are separated between those that relate to the business previously controlled by the Fiat Group which wastherefore consolidated on a line-by-line basis, and those that relate to the business of financing the final customer (the retailbusiness), which was previously headed by the associate Fidis Retail Italia.



38. Transactions resulting from unusual and/or abnormal operationsPursuant to the Consob Communication of July 28, 2006, the Group has not taken part in any unusual and/or abnormal operationsas defined in that Communication (reference should be made to the section Format of the financial statements for a definition ofthese).

39. Translation of financial statements denominated in a currency other than the eurosThe principal exchange rates used in 2006 and 2005 to translate into euros the financial statements prepared in currencies otherthan the euros were as follows:

Average At December Average At December2006 31, 2006 2005 31, 2005

U.S. dollar 1.256 1.317 1.244 1.180Pound sterling 0.682 0.672 0.684 0.685Swiss franc 1.573 1.607 1.548 1.555Polish zloty 3.896 3.831 4.023 3.860Brazilian real 2.734 2.815 3.027 2.761Argentine peso 3.879 4.066 3.637 3.589

40. Other information

Personnel costsThe income statement includes personnel costs for 6,741 million euros in 2006 (6,158 million euros in 2005).

An analysis of the average number of employees by category is provided as follows:

2006 2005

Average number of employees- Managers 2,432 2,595- White-collar 54,351 54,489- Blue-collar 116,943 112,987Total 173,726 170,071

The book value at the disposal date of the net assets sold is summarised in the following table. Specific disclosure is made forIveco Finance Holdings Limited given the significance of the amounts involved.

of which(in millions of euros) Total Iveco Finance Holdings

Non current assets 45 34Cash and cash equivalents 118 115Other current assets 2,951 2,874Total assets 3,114 3,023Debt 2,698 2,656Other liabilities 172 127Total liabilities 2,870 2,783

The consideration received from these sales and the related net cash inflows are as follows:

of which(in millions of euros) Total Iveco Finance Holdings

Total Consideration received 160 122

Net cash inflows generated:Consideration received 160 122Less: Cash and cash equivalents disposed of (118) (115)Reimbursement of loans extended by the Group’s centralised cash management 2,017 2,017Total Net cash inflows generated 2,059 2,024

37. Non-recurring transactionsPursuant to the Consob Communication of July 28, 2006, the significant non-recurring operations carried out by the Fiat Group in2006 were the purchase of 29% of the shares of Ferrari S.p.A., the sale of Banca Unione di Credito – B.U.C. and the establishmentof the joint venture FAFS with Crédit Agricole. The effects of these operations are discussed in the preceding notes whensignificant and in particular in Note 36.

For disclosure purposes it is recalled that the Group has entered certain important targeted industrial and/or commercial salesagreements during the year (in many cases these are still at the stage of the “Letter of intent”) under which manufacturing and/orcommercial joint ventures will be set up in foreign countries (including India and China), development and growth will be agreedwith other operators in the automotive business and vehicles will be constructed on behalf of other manufacturers and/or themanufacturing know how will be sold. By December 31, 2006 these agreements, which have by now become part of the Group’sordinary operations, had not yet had a significant effect on the amounts stated in the consolidated financial statements.



n A meeting was held on February 19, 2007 at the Italian Prime Minister’s Office, with the participation of the Prime Minister, theMinisters of Labour and Transport, and the Vice Minister for Economic Development, as well as national labour federation andindustry representatives. The Chief Executive Officer Sergio Marchionne illustrated the Group’s development plans for 2007-2010,with special attention being devoted to the situation in Italy. The meeting concluded with the signing of a transcript in which theItalian Government affirmed its willingness to support the Company’s development plans. In particular, this would involve closeassessment of initiatives taken in support of investments and research, and recognise the existence of conditions for granting theFiat Group a quota for “mobilità lunga” (long-term mobility benefit to bridge the period prior to retirement). This amount wasdefined in the December 18, 2006 labour agreement, which envisages that a maximum of 2,000 Group employees will be laid off.The meeting transcript also envisages setting up a roundtable with the participation of local institutions to examine the measuresnecessary to overcome logistical and economic restraints at the Termini Imerese plant in Sicily, so that production of a model canbe allocated to it starting from 2009.




41. Subsequent eventsThe principal events that have occurred after the balance sheet date are as follows:

n On January 26, 2007, Fitch Ratings upgraded Fiat’s rating from “BB-” to “BB”. The short-term rating was upheld at “B”. Theoutlook remains positive. Standard & Poor’s Ratings services revised its outlook on Fiat’s rating upwards from stable to positive,upholding the “BB” long-term and “B” short-term corporate credit ratings. On February 12, 2007, Moody’s Investors Serviceupgraded the (long-term ) rating of Fiat S.p.A. from Ba3 to Ba2, maintaining its positive outlook; the short-term rating remainsunchanged.

n On January 29, 2007, the Italian Stock Exchange removed from trading the 2007 Fiat Ordinary Share Warrants issued in 2002and expiring in 2007. The owners of the 65,509,168 outstanding warrants at that date were given the option to subscribe in January2007 to Fiat S.p.A. ordinary shares in the ratio of one Fiat ordinary share at a price of 29.364 euros for every four warrants held.To date 4,676 warrants have been exercised with the issue of 1,169 shares. As a consequence, on February 1, 2007 the capitalstock of Fiat S.p.A. increased from 6,377,257,130 euros to 6,377,262,975 euros and additional paid-in capital increased by28,481.52 euros.

n On February 1, 2007, Fiat Auto S.p.A. changed its name to “Fiat Group Automobiles S.p.A.” At the same time, four newcompanies were formed, 100% owned by Fiat Group Automobiles S.p.A.: “Fiat Automobiles S.p.A.”, “Alfa Romeo AutomobilesS.p.A.”, “Lancia Automobiles S.p.A.”, and “Fiat Light Commercial Vehicles S.p.A.” These changes are consistent with the newcorporate culture at the Fiat Group. In particular, they reflect two strategic decisions as to how to approach the business. On theone hand, the Group will exist as a unified whole, and on the other, each company will be distinguished by the specific nature ofthe respective operating sectors and individual brands. Finally, the name “Fiat Group Automobiles S.p.A.” highlights theinternational vocation of this large industrial organisation.

n On February 14, 2007, Fiat and Tata Motors signed an agreement under which calls for a Tata license to build a pick-up vehiclebearing the Fiat nameplate at the Fiat Group Automobiles plant in Córdoba, Argentina. The first vehicles will be completed on theCórdoba assembly lines during 2008. Annual production is expected to be around 20,000 units. Total planned investment in theproject is approximately 80 million US dollars. With the production of the pick-up model, the Fiat complex in Córdoba will retakethe integral activity of all its productive units, to a great extent reinitiated with the manufacture of Fiat engines and gearboxes andthe recent agreement to produce gearboxes for PSA Peugeot-Citroën. The vehicle is based on the new generation Tata pick-uptruck and will be sold in South and Central America and selected European markets through Fiat Automobiles’ import anddistribution network. This will permit the Fiat brand to make an aggressive entry into the medium pick-up sector, thanks to TataMotors’ specific know-how.

n On February 14, 2007, Iveco, and Tata Motors signed a Memorandum of Understanding (MoU) to investigate the feasibilityof cross-market cooperation in the area of Commercial Vehicles. The MoU encompasses a number of potential developments inengineering, manufacturing, the sourcing and distribution of products, aggregates and components. Having signed the MoU, Ivecoand Tata Motors will now set up a joint Steering Committee to determine the feasibility of cooperation in these areas, both in theshort- and over the long-term. If a decision is reached that this is possible, the two companies will enter definitive agreements inthe course of the coming months.


Appendix The Companies of the Fiat Group 199Appendix The Companies of the Fiat Group198

As required by Consob Resolution No. 11971 of May 14, 1999as amended (Article 126 of the Regulations), a complete listof the companies and significant investments of the Groupis provided below.The companies on this list have been classified according topercentage of ownership, method of consolidation and typeof business. The information provided for each company

includes: name, registered office, country and capital stockstated in the original currency. The percentage of Groupconsolidation and the percentage held by Fiat S.p.A. or itssubsidiaries are also shown.A separate column shows the percentage held of the votingrights at the ordinary stockholders meeting, when this figurediffers from the percentage interest held in the company.

AppendixThe Companies of the Fiat Group

Appendix The Companies of the Fiat Group 201

Fiat CR Spol. S.R.O. Prague Czech Republic 1,000,000 CZK 100.00 Fiat Auto S.p.A. 100.000Fiat Credito Compania Financiera S.A. Buenos Aires Argentina 142,630,748 ARS 100.00 Fidis S.p.A. 99.999

Fiat Auto Argentina S.A. 0.001Fiat Finance Netherlands B.V. Amsterdam Netherlands 690,000,000 EUR 100.00 Fiat Auto S.p.A. 100.000Fiat France Trappes France 235,480,520 EUR 100.00 Fiat Finance Netherlands B.V. 100.000(*) Fiat India Automobiles Private Limited Mumbai India 19,620,126,500 INR 100.00 Fiat Auto S.p.A. 100.000

Fiat India Automobiles (*) Fiat India Private Ltd. Mumbai India 8,363,617,700 INR 100.00 Private Limited 52.196 52.628

Fiat Auto S.p.A. 47.804 47.372Fiat Magyarorszag Kereskedelmi KFT. Budapest Hungary 150,000,000 HUF 100.00 Fiat Auto S.p.A. 100.000Fiat Motor Sales Ltd Slough Berkshire United Kingdom 1,500,000 GBP 100.00 Fiat Auto (U.K.) Ltd 100.000Fiat Purchasing Italia S.r.l. Turin Italy 600,000 EUR 100.00 Fiat Auto S.p.A. 100.000FIAT Purchasing Poland Sp. z o.o. Bielsko-Biala Poland 300,000 PLN 100.00 Fiat Auto S.p.A. 100.000Fiat SR Spol. SR.O. Bratislava Slovack Republic 1,000,000 SKK 100.00 Fiat Auto S.p.A. 100.000Fiat Teamsys GmbH Heilbronn Germany 500,000 EUR 100.00 Fiat Automobil AG 100.000Fiat Teamsys S.A. Alges Portugal 50,000 EUR 100.00 Fiat Auto Portuguesa S.A. 100.000Fiat Versicherungsdienst GmbH Heilbronn Germany 26,000 EUR 100.00 Fiat Automobil AG 51.000

Rimaco S.A. 49.000Fidis Hungary Ltd. under liquidation Budapest Hungary 13,000 EUR 100.00 Fidis S.p.A. 100.000Fidis S.p.A. Turin Italy 311,232,342 EUR 100.00 Fiat Auto S.p.A. 99.900

Nuove Iniziative Finanziarie 2 S.r.l. 0.100i-FAST Automotive Logistics S.r.l. Turin Italy 500,000 EUR 100.00 Fiat Auto S.p.A. 100.000Inmap 2000 Espana S.L. Alcalá De Henares Spain 4,698,919 EUR 100.00 Fiat Auto España S.A. 100.000International Metropolitan Automotive Promotion (France) S.A. Trappes France 2,977,680 EUR 100.00 Fiat France 99.997Italian Automotive Center S.A. Brussels Belgium 8,500,000 EUR 100.00 Fiat Auto (Belgio) S.A. 99.988

Nuove Iniziative Finanziarie 2 S.r.l. 0.012New Business 16 S.p.A. a socio unico Chivasso Italy 1,500,000 EUR 100.00 Fiat Auto S.p.A. 100.000Sata-Società Automobilistica Tecnologie Avanzate S.p.A. Melfi Italy 276,640,000 EUR 100.00 Fiat Auto S.p.A. 100.000

Società di CommercializzazioneSCDR Automotive Limited Basildon United Kingdom 50,000 GBP 100.00 e Distribuzione Ricambi S.p.A. 100.000

Società di CommercializzazioneSCDR (Ireland) Limited Dublin Ireland 70,000 EUR 100.00 e Distribuzione Ricambi S.p.A. 100.000

Società di CommercializzazioneSCDR (Switzerland) S.A. Schlieren Switzerland 100,000 CHF 100.00 e Distribuzione Ricambi S.p.A. 100.000Società di Commercializzazione e Distribuzione Ricambi S.p.A. Turin Italy 100,000 EUR 100.00 Fiat Auto S.p.A. 100.000Targa Rent S.r.l. Turin Italy 310,000 EUR 100.00 Fidis S.p.A. 100.000Targasys Espana S.L. Alcalá De Henares Spain 5,000 EUR 100.00 Fiat Auto España S.A. 100.000

Appendix The Companies of the Fiat Group200

% of Group % of

consoli- Interest % interest voting Name Registered office Country Capital stock Currency dation held by held rights

Controlling companyn Parent company

Fiat S.p.A. Turin Italy 6,377,257,130 EUR – – – –

Subsidiaries consolidated on a line-by-line basisn Automobiles

Fiat Auto S.p.A. Turin Italy 645,031,979 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Banco Fidis de Investimento SA Betim Brazil 116,235,465 BRL 100.00 Fidis S.p.A. 98.970

Fiat Automoveis S.A. - FIASA 1.030Clickar Assistance S.R.L. Turin Italy 335,632 EUR 100.00 Fidis S.p.A. 100.000Customer Center S.r.l. Turin Italy 2,500,000 EUR 100.00 Fiat Auto S.p.A. 100.000Easy Drive S.r.l. Turin Italy 10,400 EUR 100.00 Fiat Auto S.p.A. 99.000

Fiat Center Italia S.p.A. 1.000Fiat Auto Argentina S.A. Buenos Aires Argentina 476,464,366 ARS 100.00 Fiat Auto S.p.A. 72.495

Fiat Automoveis S.A. - FIASA 27.505Fiat Auto (Belgio) S.A. Brussels Belgium 18,600,000 EUR 100.00 Fiat Finance Netherlands B.V. 99.998

Fiat Auto (Suisse) S.A. 0.002Fiat Auto Dealer Financing SA Brussels Belgium 62,000 EUR 99.84 Fiat Auto (Belgio) S.A. 99.839Fiat Auto España S.A. Alcalá De Henares Spain 35,346,850 EUR 100.00 Fiat Finance Netherlands B.V. 99.998

Fiat Auto (Suisse) S.A. 0.002Fiat Auto Hellas S.A. Argyroupoli Greece 62,033,499 EUR 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Auto (Ireland) Ltd. Dublin Ireland 5,078,952 EUR 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Auto Japan K.K. Minatu-Ku. Tokyo Japan 420,000,000 JPY 100.00 Fiat Auto S.p.A. 100.000Fiat Auto Maroc S.A. Casablanca Morocco 1,000,000 MAD 99.95 Fiat Auto S.p.A. 99.950Fiat Auto Nederland B.V. Lijnden Netherlands 5,672,250 EUR 100.00 Fiat Netherlands Holding N.V. 100.000Fiat Auto Poland S.A. Bielsko-Biala Poland 660,334,600 PLN 100.00 Fiat Auto S.p.A. 100.000Fiat Auto Portuguesa S.A. Alges Portugal 1,000,000 EUR 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Auto South Africa (Proprietary) Ltd Sunninghill South Africa 640 ZAR 100.00 Fiat Auto S.p.A. 100.000Fiat Auto (Suisse) S.A. Schlieren Switzerland 21,400,000 CHF 100.00 Fiat Auto S.p.A. 100.000Fiat Auto (U.K.) Ltd Slough Berkshire United Kingdom 44,600,000 GBP 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Auto Var S.r.l. Turin Italy 7,370,000 EUR 100.00 Fiat Auto S.p.A. 100.000Fiat Automobil AG Heilbronn Germany 97,280,000 EUR 100.00 Fiat Finance Netherlands B.V. 99.000

Fiat Auto (Suisse) S.A. 1.000Fiat Automobil GmbH Vienna Austria 37,000 EUR 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Automobil Vertriebs GmbH Frankfurt Germany 8,700,000 EUR 100.00 Fiat Automobil AG 100.000Fiat Automobiler Danmark A/S Glostrup Denmark 55,000,000 DKK 100.00 Fiat Finance Netherlands B.V. 100.000Fiat Automoveis S.A. - FIASA Betim Brazil 1,233,506,013 BRL 100.00 Fiat Auto S.p.A. 100.000Fiat Center Italia S.p.A. Turin Italy 2,000,000 EUR 100.00 Fiat Auto S.p.A. 100.000Fiat Center (Suisse) S.A. Geneva Switzerland 13,000,000 CHF 100.00 Fiat Auto (Suisse) S.A. 100.000

Subsidiaries consolidated on a line-by-line basis (continued)% of

Group % ofconsoli- Interest % interest voting

Name Registered office Country Capital stock Currency dation held by held rights

(*) Assets held for sale.


Case Credit Holdings Limited Wilmington U.S.A. 5 USD 89.71 CNH Capital America LLC 100.000Case Equipment Holdings Limited Wilmington U.S.A. 5 USD 89.71 CNH America LLC 100.000Case Equipment International Corporation Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000Case Europe S.a.r.l. Le Plessis-Belleville France 7,622 EUR 89.71 CNH America LLC 100.000Case Harvesting Systems GmbH Berlin Germany 281,211 EUR 89.71 CNH America LLC 100.000Case IH Machinery Trading Shanghai Co. Ltd. Shanghai People’s Rep.of China 2,250,000 USD 89.71 CNH America LLC 100.000Case India Limited Wilmington U.S.A. 5 USD 89.71 CNH America LLC 100.000Case International Marketing Inc. Wilmington U.S.A. 5 USD 89.71 CNH America LLC 100.000Case LBX Holdings Inc. Wilmington U.S.A. 5 USD 89.71 CNH America LLC 100.000Case New Holland Inc. Wilmington U.S.A. 5 USD 89.71 CNH Global N.V. 100.000Case United Kingdom Limited Basildon United Kingdom 3,763,618 GBP 89.71 CNH America LLC 100.000CNH America LLC Wilmington U.S.A. 0 USD 89.71 Case New Holland Inc. 100.000CNH Argentina S.A. Buenos Aires Argentina 29,611,105 ARS 89.71 New Holland Holdings Argentina S.A. 80.654

CNH Latin America Ltda. 19.346CNH Asian Holding Limited N.V. Zedelgem Belgium 34,594,401 EUR 89.71 CNH Global N.V. 100.000CNH Australia Pty Limited St. Marys Australia 306,785,439 AUD 89.71 CNH Global N.V. 100.000CNH Baumaschinen GmbH Berlin Germany 61,355,030 EUR 89.71 CNH International S.A. 100.000CNH Belgium N.V. Zedelgem Belgium 27,268,300 EUR 89.71 CNH International S.A. 100.000CNH Canada, Ltd. Toronto Canada 28,000,100 CAD 89.71 CNH Global N.V. 100.000CNH Capital America LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital LLC 100.000CNH Capital Australia Pty Limited St. Marys Australia 83,248,874 AUD 89.71 CNH Australia Pty Limited 100.000CNH Capital Automotive Receivables LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital America LLC 100.000CNH Capital Benelux Zedelgem Belgium 6,350,000 EUR 89.71 CNH Global N.V. 98.999

CNH Capital U.K. Ltd 1.001CNH Capital Canada Ltd. Calgary Canada 1 CAD 89.71 Case Credit Holdings Limited 99.500

CNH Canada, Ltd. 0.500CNH Capital (Europe) plc Dublin Ireland 38,100 EUR 89.71 CNH Capital plc 99.984

CNH Global N.V. 0.005CNH Financial Services A/S 0.003CNH International S.A. 0.003CNH Trade N.V. 0.003CNH Financial Services S.r.l. 0.002

CNH Capital Insurance Agency Inc. Wilmington U.S.A. 5 USD 89.71 CNH Capital America LLC 100.000CNH Capital LLC Wilmington U.S.A. 0 USD 89.71 CNH America LLC 100.000CNH Capital plc Dublin Ireland 6,386,791 EUR 89.71 CNH Global N.V. 100.000CNH Capital RACES LLC Wilmington U.S.A. 1,000 USD 89.71 CNH Capital America LLC 100.000CNH Capital Receivables LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital America LLC 100.000CNH Capital U.K. Ltd Basildon United Kingdom 10,000,001 GBP 89.71 CNH Global N.V. 100.000CNH Componentes, S.A. de C.V. São Pedro Mexico 135,634,842 MXN 89.71 CNH America LLC 100.000CNH Danmark A/S Hvidovre Denmark 12,000,000 DKK 89.71 CNH International S.A. 100.000CNH Deutschland GmbH Heilbronn Germany 18,457,650 EUR 89.71 CNH International S.A. 100.000CNH Engine Corporation Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000


n FerrariFerrari S.p.A. Modena Italy 20,260,000 EUR 85.00 Fiat S.p.A. 85.000Charles Pozzi S.a.r.l. Levallois-Perret France 959,519 EUR 85.00 Ferrari West Europe S.A. 100.000Ferrari Deutschland GmbH Wiesbaden Germany 1,000,000 EUR 85.00 Ferrari International S.A. 100.000Ferrari Financial Services AG Munich Germany 1,777,600 EUR 76.50 Ferrari Financial Services S.p.A. 100.000Ferrari Financial Services S.p.A. Modena Italy 600,000 EUR 76.50 Ferrari S.p.A. 90.000Ferrari GB Limited Slough Berkshire United Kingdom 50,000 GBP 85.00 Ferrari International S.A. 100.000Ferrari GE.D. S.p.A. Modena Italy 31,000,000 EUR 85.00 Ferrari S.p.A. 100.000Ferrari International S.A. Luxembourg Luxembourg 13,112,000 EUR 85.00 Ferrari S.p.A. 99.999

Ferrari N.America Inc. 0.001Ferrari N.America Inc. Englewood Cliffs U.S.A. 200,000 USD 85.00 Ferrari S.p.A. 100.000Ferrari San Francisco Inc. Mill Valley U.S.A. 100,000 USD 85.00 Ferrari N.America Inc. 100.000Ferrari (Suisse) SA Nyon Switzerland 1,000,000 CHF 85.00 Ferrari International S.A. 100.000

Société Française de ParticipationsFerrari West Europe S.A. Levallois-Perret France 280,920 EUR 85.00 Ferrari - S.F.P.F. S.A.R.L. 100.000GSA-Gestions Sportives Automobiles S.A. Meyrin Switzerland 1,000,000 CHF 85.00 Ferrari International S.A. 100.000Pozzi Rent Snc Lyon France 15,256 EUR 85.00 Ferrari West Europe S.A. 100.000Société Française de Participations Ferrari - S.F.P.F. S.A.R.L. Levallois-Perret France 6,000,000 EUR 85.00 Ferrari International S.A. 100.000410 Park Display Inc. New York U.S.A. 100 USD 85.00 Ferrari N.America Inc. 100.000

n MaseratiMaserati S.p.A. Modena Italy 40,000,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Maserati Deutschland GmbH Wiesbaden Germany 500,000 EUR 100.00 Maserati S.p.A. 100.000Maserati GB Limited Slough Berkshire United Kingdom 20,000 GBP 100.00 Maserati S.p.A. 100.000Maserati North America Inc. Englewood Cliffs U.S.A. 1,000 USD 100.00 Maserati S.p.A. 100.000Maserati (Suisse) S.A. Nyon Switzerland 250,000 CHF 100.00 Maserati S.p.A. 100.000Maserati West Europe societé par actions simplifiée Levallois-Perret France 37,000 EUR 100.00 Maserati S.p.A. 100.000

n Agricultural and Construction EquipmentCNH Global N.V. Amsterdam Netherlands 531,719,530 EUR 89.71 Fiat Netherlands Holding N.V. 89.652 89.711

CNH Global N.V. 0.066 0.000Austoft Industries Limited St. Marys Australia 16,353,225 AUD 89.71 CNH Australia Pty Limited 100.000Banco CNH Capital S.A. Curitiba Brazil 252,285,242 BRL 89.71 CNH Global N.V. 98.760

CNH Latin America Ltda. 1.240Bli Group Inc. Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000Blue Leaf I.P. Inc. Wilmington U.S.A. 1,000 USD 89.71 Bli Group Inc. 100.000Case Brazil Holdings Inc. Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000Case Canada Receivables, Inc. Calgary Canada 1 CAD 89.71 CNH Capital America LLC 100.000Case Credit Australia Investments Pty Ltd St. Marys Australia 71,516,000 AUD 89.71 CNH Australia Pty Limited 100.000








New Holland Holding Limited London United Kingdom 165,000,000 GBP 89.71 CNH International S.A. 100.000New Holland Holdings Argentina S.A. Buenos Aires Argentina 23,555,415 ARS 89.71 CNH Latin America Ltda. 100.000New Holland Kobelco Construction New Holland Kobelco Machinery Belgium SA Herstal-lez-Liege Belgium 247,900 EUR 66.94 Construction Machinery S.p.A. 99.990New Holland Kobelco Construction Machinery S.p.A. San Mauro Torinese Italy 80,025,291 EUR 66.95 CNH Italia s.p.a. 74.625New Holland Ltd Basildon United Kingdom 1,000,000 GBP 89.71 CNH Global N.V. 100.000New Holland Tractor Ltd. N.V. Antwerp Belgium 9,631,500 EUR 89.71 New Holland Holding Limited 100.000New Holland Tractors (India) Private Ltd New Delhi India 1,949,835,804 INR 89.71 CNH Asian Holding Limited N.V. 100.000O & K - Hilfe GmbH Berlin Germany 25,565 EUR 89.71 CNH Baumaschinen GmbH 100.000Pryor Foundry Inc. Oklahoma City U.S.A. 1,000 USD 89.71 CNH America LLC 100.000Receivables Credit II Corporation Calgary Canada 1 CAD 89.71 CNH Capital America LLC 100.000RosCaseMash Saratov Russia 200,000 RUR 34.31 Case Equipment Holdings Limited 38.250 51.000Shanghai New Holland Agricultural Machinery Corporation Limited Shanghai People’s Rep.of China 35,000,000 USD 53.83 CNH Asian Holding Limited N.V. 60.000

n Powertrain TechnologiesFiat Powertrain Technologies SpA Turin Italy 750,000,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000FMA - Fabbrica Motori Automobilistici S.r.l. Pratola Serra Italy 306,186,210 EUR 100.00 Fiat Powertrain Technologies SpA 100.000Milantech S.R.L. Cusago Italy 100,000 EUR 100.00 Fiat Powertrain Technologies SpA 100.000Powertrain Mekanik Sanayi ve Ticaret Limited Sirketi Demirtas-Bursa Turkey 75,329,600 TRY 100.00 Fiat Auto Holdings B.V. in liquidatie 99.980

Fiat Powertrain Technologies SpA 0.020

n Trucks and Commercial VehiclesIveco S.p.A. Turin Italy 858,400,000 EUR 100.00 Fiat S.p.A. 60.563

Fiat Partecipazioni S.p.A. 39.437Afin Asigurari S.r.l. Bucharest Romenia 2,000,000 RON 100.00 s.c. Afin Leasing Ifn s.a. 100.000Afin Bohemia Prague Czech Republic 30,000 EUR 100.00 Afin Leasing AG 100.000Afin Bulgaria EAD Sofia Bulgaria 200,000 BGL 100.00 Afin Leasing AG 100.000Afin Hungary Kereskedelmi KFT. Budapest Hungary 24,000,000 HUF 100.00 Afin Leasing AG 100.000Afin Leasing AG Vienna Austria 1,500,000 EUR 100.00 Iveco International Trade Finance S.A. 100.000Afin Slovakia S.R.O. Bratislava Slovack Republic 30,000 EUR 100.00 Afin Leasing AG 100.000Afin Trade Bulgaria Eood Sofia Bulgaria 5,000 BGL 100.00 Afin Bulgaria EAD 100.000Afin Trade Vostok OOO Moscow Russia 345,000 RUR 100.00 Afin Leasing AG 100.000Amce-Automotive Manufacturing Co.Ethiopia Addis Ababa Ethiopia 3,000,000 ETB 70.00 Iveco S.p.A. 70.000AS Afin Baltica Tallin Estonia 800,000 EEK 100.00 Afin Leasing AG 100.000Astra Veicoli Industriali S.p.A. Piacenza Italy 10,400,000 EUR 100.00 Iveco S.p.A. 100.000Brandschutztechnik Gorlitz GmbH Gürlitz Germany 511,292 EUR 88.00 Iveco Magirus Brandschutztechnik GmbH 88.000C.A.M.I.V.A. Constructeurs Associés de Matériels d`Incendie, Voirie, Aviation S.A. Saint-Alban-Leysse France 1,870,169 EUR 99.96 Iveco Magirus Fire Fighting GmbH 99.961


CNH Financial Services A/S Hvidovre Denmark 500,000 DKK 89.71 CNH Global N.V. 100.000CNH Financial Services GmbH Heilbronn Germany 1,151,000 EUR 89.71 CNH International S.A. 100.000CNH Financial Services S.A.S. Puteaux France 28,860,625 EUR 89.71 CNH Global N.V. 98.040

CNH Capital Benelux 1.960CNH Financial Services S.r.l. Modena Italy 10,400 EUR 89.71 CNH Capital plc 100.000CNH France S.A. Morigny-Champigny France 138,813,150 EUR 89.71 CNH International S.A. 100.000CNH International S.A. Luxembourg Luxembourg 300,000,000 USD 89.71 CNH Global N.V. 100.000CNH Italia s.p.a. Modena Italy 15,600,000 EUR 89.71 CNH Osterreich GmbH 75.000

CNH Global N.V. 25.000CNH Latin America Ltda. Contagem Brazil 967,783,051 BRL 89.71 CNH Global N.V. 85.658

Case Brazil Holdings Inc. 12.557Case Equipment International Corporation 1.785

CNH Maquinaria Spain S.A. Coslada Spain 21,000,000 EUR 89.71 CNH International S.A. 100.000CNH Osterreich GmbH St. Valentin Austria 2,000,000 EUR 89.71 CNH Global N.V. 100.000CNH Polska Sp. z o.o. Plock Poland 162,591,660 PLN 89.71 CNH Belgium N.V. 99.995

Fiat Polska Sp. z o.o. 0.005CNH Portugal-Comercio de Tractores e Maquinas Agricolas Ltda Carnaxide Portugal 498,798 EUR 89.71 CNH International S.A. 99.980

CNH Italia s.p.a. 0.020CNH Receivables LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital America LLC 100.000CNH Serviços Técnicos e Desenvolvimento de Negocios Ltda Curitiba Brazil 1,000,000 BRL 89.71 Banco CNH Capital S.A. 100.000CNH Trade N.V. Amsterdam Netherlands 50,000 EUR 89.71 CNH Global N.V. 100.000CNH U.K. Limited Basildon United Kingdom 91,262,275 GBP 89.71 New Holland Holding Limited 100.000CNH Wholesale Receivables LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital America LLC 100.000Fiatallis North America LLC Wilmington U.S.A. 32 USD 89.71 CNH America LLC 100.000Flexi-Coil (U.K.) Limited Basildon United Kingdom 3,291,776 GBP 89.71 CNH Canada, Ltd. 100.000Harbin New Holland Tractors Co., Ltd. Harbin People’s Rep.of China 2,859,091 USD 89.71 CNH Asian Holding Limited N.V. 99.000

CNH International S.A. 1.000HFI Holdings Inc. Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000JV Uzcaseagroleasing LLC Tashkent Uzbekistan 0 USD 45.75 Case Credit Holdings Limited 51.000JV UzCaseMash LLC Tashkent Uzbekistan 0 USD 53.83 Case Equipment Holdings Limited 60.000JV UzCaseService LLC Tashkent Uzbekistan 0 USD 45.75 Case Equipment Holdings Limited 51.000JV UzCaseTractor LLC Tashkent Uzbekistan 0 USD 45.75 Case Equipment Holdings Limited 51.000Kobelco Construction Machinery America LLC Wilmington U.S.A. 0 USD 58.31 New Holland Excavator Holdings LLC 65.000MBA AG Bassersdorf Switzerland 4,000,000 CHF 89.71 CNH Global N.V. 100.000New Holland Australia Pty Ltd St. Marys Australia 1 AUD 89.71 CNH Australia Pty Limited 100.000New Holland Credit Australia Pty Limited St. Marys Australia 725,834 AUD 89.71 CNH Capital Australia Pty Limited 100.000New Holland Credit Company, LLC Wilmington U.S.A. 0 USD 89.71 CNH Capital LLC 100.000New Holland Excavator Holdings LLC Wilmington U.S.A. 0 USD 89.71 CNH America LLC 100.000








Iveco Magirus AG Ulm Germany 250,000,000 EUR 100.00 Iveco S.p.A. 53.660Fiat Netherlands Holding N.V. 46.340

Iveco Magirus Brandschutztechnik GmbH Ulm Germany 6,493,407 EUR 100.00 Iveco Magirus Fire Fighting GmbH 99.764Iveco S.p.A. 0.236

Iveco Magirus Fire Fighting GmbH Weisweil Germany 30,776,857 EUR 100.00 Iveco Magirus AG 90.032Iveco S.p.A. 9.968

Iveco Mezzi Speciali S.p.A. Brescia Italy 13,120,000 EUR 100.00 Iveco S.p.A. 100.000Iveco Motorenforschung AG Arbon Switzerland 4,600,000 CHF 100.00 Iveco S.p.A. 60.000

Iveco France 40.000Iveco Motors of North America Inc. Wilmington U.S.A. 1 USD 100.00 Iveco S.p.A. 100.000Iveco Nederland B.V. Breda Netherlands 4,537,802 EUR 100.00 Fiat Netherlands Holding N.V. 100.000Iveco Nord Nutzfahrzeuge GmbH Hamburg Germany 818,500 EUR 100.00 Iveco Magirus AG 100.000Iveco Nord-Ost Nutzfahrzeuge GmbH Berlin Germany 2,120,000 EUR 100.00 Iveco Magirus AG 100.000Iveco Norge A.S. Voyenenga Norway 18,600,000 NOK 100.00 Iveco S.p.A. 100.000Iveco Otomotiv Ticaret A.S. Samandira-Kartal/Istanbul Turkey 5,960,707 TRY 100.00 Iveco S.p.A. 99.995Iveco Partecipazioni Finanziarie S.r.l. Turin Italy 50,000,000 EUR 100.00 Iveco S.p.A. 100.000Iveco Participations S.A. Trappes France 10,896,100 EUR 100.00 Iveco S.p.A. 100.000Iveco Pension Trustee Ltd Watford United Kingdom 2 GBP 100.00 Iveco Holdings Limited 50.000

Iveco Limited 50.000Iveco Poland Ltd. Warsaw Poland 46,974,500 PLN 100.00 Iveco S.p.A. 99.989

Fiat Polska Sp. z o.o. 0.011Iveco Portugal-Comercio de Veiculos Industriais S.A. Vila Franca de Xira Portugal 15,962,000 EUR 100.00 Iveco S.p.A. 99.997

Astra Veicoli Industriali S.p.A. 0.001Iveco (Schweiz) AG Kloten Switzerland 9,000,000 CHF 100.00 Iveco Nederland B.V. 100.000Iveco South Africa (Pty) Ltd. Wadewille South Africa 15,000,750 ZAR 100.00 Iveco S.p.A. 100.000Iveco Sud-West Nutzfahrzeuge GmbH Mannheim-Neckarau Germany 1,533,900 EUR 100.00 Iveco Magirus AG 100.000Iveco Sweden A.B. Arlov Sweden 600,000 SEK 100.00 Iveco S.p.A. 100.000Iveco Trucks Australia Limited Dandenong Australia 47,492,260 AUD 100.00 Iveco S.p.A. 100.000Iveco Ukraine Inc. Kiev Ukraine 55,961,760 UAH 99.97 Iveco S.p.A. 99.968Iveco Venezuela C.A. La Victoria Venezuela 2,495,691,000 VEB 100.00 Iveco S.p.A. 100.000Iveco West Nutzfahrzeuge GmbH Cologne Germany 1,662,000 EUR 100.00 Iveco Magirus AG 100.000Karosa A.S. Vysoke Myto Czech Republic 1,065,559,000 CZK 97.98 Iveco France 97.978Karosa r.s.o. Bratislava Slovack Republic 200,000 SKK 97.98 Karosa A.S. 100.000Lohr-Magirus Feuerwehrtechnik GmbH Kainbach Austria 1,271,775 EUR 95.00 Iveco Magirus Brandschutztechnik GmbH 95.000Mediterranea de Camiones S.L. Valencia Spain 48,080 EUR 100.00 Iveco España S.L. 100.000Officine Brennero S.p.A. Trento Italy 7,120,000 EUR 100.00 Iveco S.p.A. 100.000OOO Afin Leasing Vostok LLC Moscow Russia 50,000,000 RUR 100.00 Afin Leasing AG 100.000S.A. Iveco Belgium N.V. Groot Belgium 6,000,000 EUR 100.00 Iveco S.p.A. 99.983

Iveco Nederland B.V. 0.017s.c. Afin Leasing Ifn s.a. Bucharest Romenia 2,063,200,000 RON 100.00 Afin Leasing AG 100.000s.c. Afin Trade Company S.r.l. Bucharest Romenia 17,500 RON 100.00 Afin Leasing AG 100.000


Componentes Mecanicos S.A. Barcelona Spain 37,405,038 EUR 59.39 Iveco España S.L. 59.387Effe Grundbesitz GmbH Ulm Germany 10,225,838 EUR 100.00 Iveco Investitions GmbH 90.000

Iveco S.p.A. 10.000Elettronica Trasporti Commerciali S.r.l. (Eltrac S.r.l.) Turin Italy 109,200 EUR 100.00 Iveco S.p.A. 100.000European Engine Alliance S.c.r.l. Turin Italy 32,044,797 EUR 63.24 CNH Global N.V. 33.333

Iveco S.p.A. 33.333FPT - Powertrain Technologies France S.A. Garchizy France 73,444,960 EUR 100.00 Iveco France 97.200

Iveco Participations S.A. 2.800Heuliez Bus S.A. Rorthais France 9,000,000 EUR 100.00 Société Charolaise de Participations S.A. 100.000IAV-Industrie-Anlagen-Verpachtung GmbH Ulm Germany 25,565 EUR 100.00 Iveco Investitions GmbH 95.000

Iveco S.p.A. 5.000Ikarus Egyedi Autobusz GY Budapest Hungary 350,000,000 HUF 68.15 Iveco España S.L. 68.146Industrial Vehicles Center Hainaut S.A. Charleroi Belgium 600,000 EUR 100.00 S.A. Iveco Belgium N.V. 95.000

Iveco Nederland B.V. 5.000Irisbus Australia Pty. Ltd. Dandenong Australia 1,500,000 AUD 100.00 Iveco España S.L. 100.000Irisbus Benelux Ltd. Leudelange Luxembourg 594,000 EUR 100.00 Iveco France 99.983

Société Charolaise de Participations S.A. 0.017Irisbus Deutschland GmbH Mainz-Mombach Germany 8,800,000 EUR 100.00 Iveco España S.L. 100.000Irisbus Italia S.p.A. Turin Italy 44,644,811 EUR 100.00 Iveco España S.L. 100.000Irisbus (U.K.) Ltd Watford United Kingdom 200,000 GBP 100.00 Iveco España S.L. 100.000IVC Brabant N.V. S.A. Groot Belgium 800,000 EUR 100.00 S.A. Iveco Belgium N.V. 75.000

Iveco Nederland B.V. 25.000Iveco Argentina S.A. Cordoba Argentina 130,237,793 ARS 100.00 Iveco España S.L. 99.000

Astra Veicoli Industriali S.p.A. 1.000Iveco Austria GmbH Vienna Austria 6,178,000 EUR 100.00 Iveco S.p.A. 100.000Iveco Bayern GmbH Nuremberg Germany 742,000 EUR 100.00 Iveco Magirus AG 100.000Iveco Contract Services Limited Watford United Kingdom 17,000,000 GBP 100.00 Iveco Partecipazioni Finanziarie S.r.l. 100.000Iveco Danmark A/S Glostrup Denmark 501,000 DKK 100.00 Iveco S.p.A. 100.000Iveco España S.L. Madrid Spain 121,612,116 EUR 100.00 Iveco S.p.A. 100.000Iveco Est Sas Haunconcourt France 305,600 EUR 100.00 Iveco France 100.000Iveco Finland OY Espoo Finland 200,000 EUR 100.00 Iveco S.p.A. 100.000Iveco France Vénissieux France 92,856,130 EUR 100.00 Iveco España S.L. 50.326

Iveco S.p.A. 49.674Iveco Holdings Limited Watford United Kingdom 47,000,000 GBP 100.00 Iveco S.p.A. 100.000Iveco International Trade Finance S.A. Paradiso Switzerland 30,800,000 CHF 100.00 Iveco Partecipazioni Finanziarie S.r.l. 100.000Iveco Investitions GmbH Ulm Germany 2,556,459 EUR 100.00 Iveco Magirus AG 99.020

Iveco S.p.A. 0.980Iveco Latin America Ltda Vila da Serra Brazil 684,700,000 BRL 100.00 Iveco España S.L. 99.999

Astra Veicoli Industriali S.p.A. 0.001Iveco Limited Watford United Kingdom 117,000,000 GBP 100.00 Iveco Holdings Limited 100.000Iveco L.V.I. S.a.s. Saint-Priest-En-Jarez France 503,250 EUR 100.00 Iveco France 100.000








Automotive Lighting Rear Industrial Yorka de Tepotzotlan S.A. de C.V. Mexico City Mexico 50,000 MXN 99.99 Lamps Mexico S. de r.l. de C.V. 99.000

Industrial Yorka de Mexico S.A. de C.V. 1.000Magneti Marelli Sistemas

Industrias Magneti Marelli Mexico S.A. de C.V. Tepotzotlan Mexico 50,000 MXN 99.99 Electronicos Mexico S.A. 99.998Servicios Administrativos Corp. IPASA S.A. 0.002Magneti Marelli Sistemas Automotivos

Kadron S/A Maua Brazil 2,622,229 BRL 99.99 Industria e Comercio Ltda 100.000Magneti Marelli After Market S.p.A. Turin Italy 1,550,000 EUR 99.99 Magneti Marelli Holding S.p.A. 99.999 100.000Magneti Marelli Argentina S.A. Buenos Aires Argentina 700,000 ARS 99.99 Magneti Marelli Holding S.p.A. 95.000

Magneti Marelli France S.a.s. 5.000Magneti Marelli Automotive Components (WUHU) Co. Ltd. Anhui People’s Rep.of China 5,000,000 USD 99.99 Magneti Marelli Powertrain S.p.A. 100.000Magneti Marelli Cofap Companhia Fabricadora de Pecas Santo Andre Brazil 170,950,534 BRL 99.63 Magneti Marelli Holding S.p.A. 99.634 99.966Magneti Marelli Components B.V. in liquidation Amsterdam Netherlands 53,600,000 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Conjuntos de Escape S.A. Buenos Aires Argentina 12,000 ARS 99.99 Magneti Marelli Sistemi di Scarico S.p.A. 95.000

Magneti Marelli Argentina S.A. 5.000Magneti Marelli Deutschland GmbH in liquidation Russelsheim Germany 1,050,000 EUR 99.99 Magneti Marelli After Market S.p.A. 100.000Magneti Marelli do Brasil Industria e Comercio SA Hortolandia Brazil 40,568,427 BRL 99.86 Magneti Marelli Holding S.p.A. 99.872 99.990Magneti Marelli Electronica SL Barcelona Spain 18,388,581 EUR 99.99 Magneti Marelli Iberica S.A. 100.000Magneti Marelli Elektronische Systeme GmbH Heilbronn Germany 100,000 EUR 99.99 Magneti Marelli Sistemi Elettronici S.p.A. 100.000Magneti Marelli Exhaust Systems Polska Sp. z o.o. Sosnowiec Poland 15,000,000 PLN 99.99 Magneti Marelli Sistemi di Scarico S.p.A. 99.993

Fiat Polska Sp. z o.o. 0.007Magneti Marelli France S.a.s. Nanterre France 42,672,960 EUR 99.99 Magneti Marelli Sistemi Elettronici S.p.A. 99.999

Ufima S.A.S. 0.001Magneti Marelli Guangzhou Motor Vehicle Instruments Co. Limited Guangzhou People’s Rep.of China 8,100,000 USD 99.99 Magneti Marelli Sistemi Elettronici S.p.A. 100.000Magneti Marelli Holding U.S.A. Inc. Wixom U.S.A. 10 USD 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Iberica S.A. Santpedor Spain 18,099,776 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Motopropulsion France SAS Nanterre France 10,692,500 EUR 99.99 Magneti Marelli Powertrain S.p.A. 100.000

Magneti Marelli CofapMagneti Marelli North America Inc. Wilmington U.S.A. 40,223,205 USD 99.63 Companhia Fabricadora de Pecas 100.000Magneti Marelli Poland S.A. Sosnowiec Poland 10,567,800 PLN 99.99 Magneti Marelli Holding S.p.A. 99.995

Fiat Polska Sp. z o.o. 0.005Magneti Marelli Powertrain GmbH Russelsheim Germany 100,000 EUR 99.99 Magneti Marelli Powertrain S.p.A. 100.000Magneti Marelli Powertrain (Shanghai) Co. Ltd. Shanghai People’s Rep.of China 17,500,000 USD 99.99 Magneti Marelli Powertrain S.p.A. 100.000Magneti Marelli Powertrain S.p.A. Corbetta Italy 85,690,872 EUR 99.99 Magneti Marelli Holding S.p.A. 99.999 100.000Magneti Marelli Powertrain U.S.A. LLC Sanford U.S.A. 25,000,000 USD 99.99 Magneti Marelli Holding U.S.A. Inc. 100.000


S.C.I. La Méditerranéenne Vitrolles France 248,000 EUR 100.00 Iveco France 50.000Société de Diffusion de Vehicules Industriels-SDVI S.A.S. 50.000

Seddon Atkinson Vehicles Ltd Oldham United Kingdom 41,700,000 GBP 100.00 Iveco Holdings Limited 100.000Société Charolaise de Participations S.A. Vénissieux France 2,370,000 EUR 100.00 Iveco España S.L. 100.000Société de Diffusion de Vehicules Industriels-SDVI S.A.S. Trappes France 7,022,400 EUR 100.00 Iveco France 100.000Transolver Service S.A. Madrid Spain 610,000 EUR 100.00 Iveco Partecipazioni Finanziarie S.r.l. 100.000Transolver Service S.p.A. Turin Italy 1,989,000 EUR 100.00 Iveco Partecipazioni Finanziarie S.r.l. 100.000Transolver Services GmbH Heilbronn Germany 750,000 EUR 100.00 Iveco Partecipazioni Finanziarie S.r.l. 100.000UAB Afin Baltica (Lithuania) Vilnius Lithuania 35,000 LTT 100.00 Afin Leasing AG 100.000Utilitaries & Véhicules Industriels Franciliens-UVIF SAS La Garenne France 1,067,500 EUR 100.00 Iveco France 100.000Zona Franca Alari Sepauto S.A. Barcelona Spain 520,560 EUR 51.87 Iveco España S.L. 51.8672 H Energy S.A.S. Fécamp France 2,000,000 EUR 100.00 Iveco Participations S.A. 100.000

n ComponentsMagneti Marelli Holding S.p.A. Corbetta Italy 254,324,998 EUR 99.99 Fiat S.p.A. 99.991 100.000Automotive Lighting Brotterode GmbH Meiningen Germany 7,270,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000Automotive Lighting Italia S.p.A. Venaria Reale Italy 2,000,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000Automotive Lighting LLC Farmington Hills U.S.A. 25,001,000 USD 99.99 Magneti Marelli Holding U.S.A. Inc. 100.000Automotive Lighting o.o.o. Rjiasan Russia 36,875,663 RUR 99.99 Automotive Lighting Reutlingen GmbH 100.000Automotive Lighting Polska Sp. z o.o. Sosnowiec Poland 83,500,000 PLN 99.99 Automotive Lighting Reutlingen GmbH 99.997

Fiat Polska Sp. z o.o. 0.003Automotive Lighting Rear Automotive Lighting Rear Lamps Espana S.A. Llinares del Valles Spain 3,655,385 EUR 99.99 Lamps Italia S.p.A. 100.000Automotive Lighting Rear Automotive Lighting Rear Lamps France S.A. Saint Denis France 1,011,536 EUR 99.98 Lamps Italia S.p.A. 99.992Automotive Lighting Rear Lamps Italia S.p.A. Tolmezzo Italy 10,000,000 EUR 99.99 Automotive Lighting Reutlingen GmbH 100.000Automotive Lighting Rear Lamps Mexico S. de r.l. de C.V. El Marques Queretaro Mexico 50,000 MXN 99.99 Magneti Marelli Holding U.S.A. Inc. 100.000Automotive Lighting Reutlingen GmbH Reutlingen Germany 1,330,000 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Automotive Lighting S.R.O. Jihlava Czech Republic 927,637,000 CZK 99.99 Automotive Lighting Reutlingen GmbH 100.000Automotive Lighting UK Limited Cannock United Kingdom 15,387,348 GBP 99.99 Magneti Marelli Holding S.p.A. 100.000Fiat CIEI S.p.A. in liquidation Corbetta Italy 220,211 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000

Automotive Lighting Rear Industrial Yorka de Mexico S.A. de C.V. Mexico City Mexico 50,000 MXN 99.99 Lamps Mexico S. de r.l. de C.V. 98.000

Industrial Yorka de Tepotzotlan S.A. de C.V. 2.000








(*) Shanghai Meridian Magnesium Products Company Limited Shanghai People’s Rep.of China 12,000,000 USD 25.95 Meridian Technologies Inc. 60.000Teksid Acquisition Inc. Toronto Canada 63,700,001 CAD 84.79 Teksid S.p.A. 100.000Teksid do Brasil Ltda Betim Brazil 59,899,570 BRL 84.79 Teksid S.p.A. 100.000Teksid Hierro De Mexico Arrendadora S.A. de C.V. Frontera Mexico 497,690,000 MXN 84.79 Teksid S.p.A. 100.000Teksid Hierro de Mexico S.A. de C.V. Frontera Mexico 418,874,300 MXN 84.79 Teksid S.p.A. 100.000Teksid Inc. Wilmington U.S.A. 100,000 USD 84.79 Teksid S.p.A. 100.000Teksid Iron Poland Sp. z o.o. Skoczow Poland 115,678,500 PLN 84.79 Teksid S.p.A. 99.996

Fiat Polska Sp. z o.o. 0.004

n Production SystemsComau S.p.A. Grugliasco Italy 100,000,000 EUR 100.00 Fiat S.p.A. 100.000Autodie International, Inc. Grand Rapids U.S.A. 1,000 USD 100.00 Comau Pico Holdings Corporation 100.000ComauFrance S.A. Trappes France 11,900,000 EUR 100.00 Comau S.p.A. 100.000Comau Argentina S.A. Buenos Aires Argentina 25,680 ARS 100.00 Comau S.p.A. 55.280

Comau do Brasil Industria e Comercio Ltda. 44.688Fiat Argentina S.A. 0.031

Comau Deutschland GmbH Boblingen Germany 1,330,000 EUR 100.00 Comau S.p.A. 100.000Comau do Brasil Industria e Comercio Ltda. Betim Brazil 29,312,653 BRL 100.00 Comau S.p.A. 99.999

Fiat do Brasil S.A. 0.001Comau Estil Unl. Luton United Kingdom 86,027,139 USD 100.00 Comau S.p.A. 100.000Comau India Private Limited Pune India 58,435,020 INR 100.00 Comau S.p.A. 99.990

Comau Deutschland GmbH 0.010Comau Pico Expatriate, Inc. Southfield U.S.A. 1,000 USD 100.00 Comau Pico Holdings Corporation 100.000Comau Pico Holdings Corporation New York U.S.A. 100 USD 100.00 Comau S.p.A. 100.000Comau Pico Iaisa S.de R.L. de C.V. Tepotzotlan Mexico 3,000 MXN 100.00 Comau Pico Mexico S.de R.L. de C.V. 99.967

Comau S.p.A. 0.033Comau Pico Inc. Southfield U.S.A. 21,455 USD 100.00 Comau Pico Holdings Corporation 100.000Comau Pico Mexico S.de R.L. de C.V. Tepotzotlan Mexico 3,000 MXN 100.00 Comau S.p.A. 99.967

Comau Deutschland GmbH 0.033Comau Pico of Canada Inc. Windsor Canada 100 CAD 100.00 Comau Pico Inc. 100.000Comau Pico Pitex S.de R.L. C.V. Tepotzotlan Mexico 3,000 MXN 100.00 Comau Pico Mexico S.de R.L. de C.V. 99.967

Comau S.p.A. 0.033Comau Pico Resources, Inc. Southfield U.S.A. 1,000 USD 100.00 Comau Pico Holdings Corporation 100.000Comau Pico Trebol S.de R.L. de C.V. Tepotzotlan Mexico 3,000 MXN 100.00 Comau Pico Mexico S.de R.L. de C.V. 99.967

Comau S.p.A. 0.033Comau Poland Sp. z o.o. Bielsko-Biala Poland 2,100,000 PLN 100.00 Comau S.p.A. 99.976

Fiat Polska Sp. z o.o. 0.024Comau Romania S.R.L. Bihor Romenia 324,980 RON 100.00 Comau S.p.A. 100.000


Magneti Marelli Racing Ltd Basildon United Kingdom 10,000 GBP 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Sistemas Automotivos Industria e Comercio Ltda Contagem Brazil 196,634,874 BRL 99.99 Magneti Marelli Powertrain S.p.A. 66.111

Automotive Lighting Reutlingen GmbH 33.889Magneti Marelli Sistemas Electronicos Mexico S.A. Tepotzotlan Mexico 23,611,680 MXN 99.99 Magneti Marelli Sistemi Elettronici S.p.A. 100.000Magneti Marelli Sistemi di Scarico S.p.A. Corbetta Italy 20,000,000 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Sistemi Elettronici S.p.A. Corbetta Italy 74,897,548 EUR 99.99 Magneti Marelli Holding S.p.A. 99.999 100.000Magneti Marelli South Africa (Proprietary) Limited Johannesburg South Africa 1,950,000 ZAR 99.99 Magneti Marelli Sistemi di Scarico S.p.A. 100.000Magneti Marelli Suspension Systems Bielsko Sp. z.o.o. Bielsko-Biala Poland 70,050,000 PLN 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Suspension Systems Poland Sp. z o.o. Sosnowiec Poland 43,100,000 PLN 99.99 Magneti Marelli Holding S.p.A. 99.993

Fiat Polska Sp. z o.o. 0.007Magneti Marelli Tubos de Escape SL Barcelona Spain 10,154,256 EUR 99.99 Magneti Marelli Iberica S.A. 100.000Magneti Marelli U.K. Limited in liquidation Cannock United Kingdom 12,400,000 GBP 99.99 Magneti Marelli Holding S.p.A. 100.000Mako Elektrik Sanayi Ve Ticaret A.S. Osmangazi Bursa Turkey 16,500,000 TRY 94.99 Magneti Marelli Holding S.p.A. 95.000Malaysian Automotive Lighting SDN. BHD Penang Malaysia 8,000,000 MYR 79.99 Automotive Lighting Reutlingen GmbH 80.000

Magneti Marelli Sistemas Servicios Administrativos Corp. IPASA S.A. Col. Chapultepec Mexico 1,000 MXN 99.99 Electronicos Mexico S.A. 99.990

Industrias Magneti Marelli Mexico S.A. de C.V. 0.010

Sistemi Sospensioni S.p.A. Corbetta Italy 60,500,000 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Tecnologia de Iluminacion Automotriz S.A. de C.V. Chihuahua Mexico 50,000 MXN 99.99 Automotive Lighting LLC 100.000Ufima S.A.S. Nanterre France 44,940 EUR 99.94 Magneti Marelli Holding S.p.A. 64.967

Fiat Partecipazioni S.p.A. 34.980

n Metallurgical ProductsTeksid S.p.A. Turin Italy 145,817,739 EUR 84.79 Fiat S.p.A. 84.791(*) CHONGQING MERIDIAN BoAo MAGNESIUM Co. Ltd. Nanpinq People’s Rep.of China 3,000,000 USD 23.78 Meridian Technologies Inc. 55.000Compania Industrial Frontera S.A. de C.V. Frontera Mexico 50,000 MXN 84.79 Teksid Hierro de Mexico S.A. de C.V. 100.000Fonderie du Poitou Fonte S.A.S. Ingrandes-sur-Vienne France 26,958,464 EUR 84.79 Teksid S.p.A. 100.000Funfrap-Fundicao Portuguesa S.A. Cacia Portugal 13,697,550 EUR 70.89 Fonderie du Poitou Fonte S.A.S. 83.607(*) Magnesium Products of America Inc. Eaton Rapids U.S.A. 43,454,000 USD 43.24 Meridian Technologies Inc. 100.000(*) Magnesium Products of Italy S.r.l. Verres Italy 13,962,000 EUR 43.24 Magnesium Products of America Inc. 100.000(*) Meridian Deutschland GmbH Stuttgard Germany 25,600 EUR 43.24 Meridian Technologies Inc. 100.000(*) Meridian Technologies Inc. Saint John Canada 158,823,445 CAD 43.24 Teksid S.p.A. 31.450

Teksid Acquisition Inc. 19.550(*) Meridian Technologies Japan Inc. Saint John Canada 6,210 CAD 43.24 Meridian Technologies Inc. 100.000







(*) Assets held for sale.(*) Assets held for sale.


C.R.F. Società Consortile per Azioni 1.500Editrice La Stampa S.p.A. 1.500Fiat Gesco S.p.A. 1.500Magneti Marelli Holding S.p.A. 1.500

Fiat U.K. Limited Basildon United Kingdom 750,000 GBP 100.00 Fiat Gesco S.p.A. 100.000(*) Ingest Facility Polska Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 Ingest Facility S.p.A. 100.000(*) Ingest Facility S.p.A. Turin Italy 1,700,000 EUR 100.00 Business Solutions S.p.A. 100.000ITS GSA FiatGroup France S.A.S. Trappes France 1,737,440 EUR 100.00 Fiat Finance et Services S.A. 100.000ITS-GSA Deutschland GmbH Ulm Germany 25,000 EUR 100.00 Fiat GmbH 100.000ITS-GSA U.K. Limited Watford United Kingdom 50,000 GBP 100.00 Fiat U.K. Limited 100.000KeyG Consulting S.p.A. Turin Italy 167,352 EUR 60.00 Fiat Gesco S.p.A. 60.000Risk Management S.p.A. Turin Italy 120,000 EUR 100.00 Business Solutions S.p.A. 100.000

Servizi e Attività Doganali Sadi Polska-Agencja Celna Sp. z o.o. Bielsko-Biala Poland 500,000 PLN 100.00 per l`Industria S.p.A. 99.800

Fiat Polska Sp. z o.o. 0.200Servizi e Attività Doganali per l`Industria S.p.A. Turin Italy 520,000 EUR 100.00 Fiat Gesco S.p.A. 100.000Telexis do Brasil Ltda. Nova Lima Brazil 1,400 BRL 100.00 Fiat do Brasil S.A. 99.929

Fiat Financas Brasil Ltda 0.071

n Publishing and CommunicationsItedi-Italiana Edizioni S.p.A. Turin Italy 5,980,000 EUR 100.00 Fiat S.p.A. 100.000BMI S.p.A. Genoa Italy 124,820 EUR 58.00 Itedi-Italiana Edizioni S.p.A. 58.004Editrice La Stampa S.p.A. Turin Italy 4,160,000 EUR 100.00 Itedi-Italiana Edizioni S.p.A. 100.000La Stampa Europe SAS Paris France 18,600,000 EUR 100.00 Itedi-Italiana Edizioni S.p.A. 100.000Publikompass S.p.A. Milan Italy 3,068,000 EUR 100.00 Itedi-Italiana Edizioni S.p.A. 100.000

n Holding companies and Other companiesCentro Ricerche Plast-Optica S.p.A. Amaro Italy 1,033,000 EUR 75.13 C.R.F. Società Consortile per Azioni 51.000

Automotive Lighting Rear Lamps Italia S.p.A. 24.500

C.R.F. Società Consortile per Azioni Orbassano Italy 45,000,000 EUR 99.29 Fiat Partecipazioni S.p.A. 52.061Fiat Auto S.p.A. 17.478Iveco S.p.A. 9.987Magneti Marelli Holding S.p.A. 7.490Fiat Powertrain Technologies SpA 4.994CNH Italia s.p.a. 2.497Comau S.p.A. 2.497Teksid S.p.A. 2.497Ferrari S.p.A. 0.499

Deposito Avogadro S.r.l. Turin Italy 100,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000


Comau Russia OOO Moscow Russia 4,770,225 RUR 100.00 Comau S.p.A. 99.000Comau Deutschland GmbH 1.000

Comau SA Body Systems (Pty) Ltd. Uitenhage South Africa 301 ZAR 100.00 Comau South Africa (Pty) Ltd. 100.000Comau SA Press Tools and Parts (Pty) Ltd. Uitenhage South Africa 100 ZAR 100.00 Comau SA Body Systems (Pty) Ltd. 100.000Comau SA Properties (Pty) Ltd. Uitenhage South Africa 100 ZAR 100.00 Comau SA Body Systems (Pty) Ltd. 100.000Comau Service Systems S.L. Madrid Spain 250,000 EUR 100.00 Comau S.p.A. 100.000Comau (Shanghai) Automotive Equipment Co. Ltd. Shanghai People’s Rep.of China 1,000,000 USD 100.00 Comau S.p.A. 100.000Comau South Africa (Pty) Ltd. Uitenhage South Africa 1,001,001 ZAR 100.00 Comau S.p.A. 100.000Comau Sverige AB Trollhattan Sweden 5,000,000 SEK 100.00 Comau S.p.A. 100.000Mecaner S.A. Urdùliz Spain 6,000,000 EUR 100.00 Comau S.p.A. 100.000Pico Europe, Inc. Southfield U.S.A. 1,000 USD 100.00 Comau S.p.A. 100.000Precision Pico Products Inc. Plymouth U.S.A. 1,000 USD 100.00 Comau Pico Holdings Corporation 100.000

n ServicesBusiness Solutions S.p.A. Turin Italy 4,791,396 EUR 100.00 Fiat S.p.A. 100.000(*) Building Services S.r.l. Turin Italy 90,000 EUR 51.00 Ingest Facility S.p.A. 51.000(*) Building Support S.r.l. Turin Italy 90,000 EUR 51.00 Building Services S.r.l. 100.000Business Solutions Argentina S.A. Buenos Aires Argentina 845,860 ARS 100.00 Fiat do Brasil S.A. 99.990

Fiat Auto Argentina S.A. 0.010Business Solutions Polska Sp. z o.o. Bielsko-Biala Poland 3,600,000 PLN 100.00 Business Solutions S.p.A. 99.986

Fiat Polska Sp. z o.o. 0.014eSPIN S.p.A. Turin Italy 1,000,000 EUR 100.00 Business Solutions S.p.A. 100.000Fiat Argentina S.A. Buenos Aires Argentina 4,446,257 ARS 100.00 Fiat Partecipazioni S.p.A. 90.961

Fiat do Brasil S.A. 9.029SGR-Sociedad para la Gestion de Riesgos S.A. 0.009Fiat Auto Argentina S.A. 0.001

Fiat do Brasil S.A. Nova Lima Brazil 28,513,780 BRL 100.00 Fiat Partecipazioni S.p.A. 99.998Fiat Gesco S.p.A. 0.002

Fiat Finance et Services S.A. Trappes France 3,700,000 EUR 100.00 Business Solutions S.p.A. 99.997Fiat Partecipazioni S.p.A. 0.001

Fiat GES.CO. Belgium N.V. Zedelgem Belgium 62,500 EUR 100.00 Fiat U.K. Limited 99.960Fiat Gesco S.p.A. 0.040

Fiat Gesco S.p.A. Turin Italy 3,600,000 EUR 100.00 Business Solutions S.p.A. 100.000Fiat GmbH Ulm Germany 200,000 EUR 100.00 Fiat Gesco S.p.A. 100.000Fiat Iberica S.A. Madrid Spain 2,797,054 EUR 100.00 Fiat Gesco S.p.A. 100.000Fiat Servizi per l’Industria S.c.p.a. Turin Italy 1,652,669 EUR 99.38 Fiat Partecipazioni S.p.A. 51.000

Fiat Auto S.p.A. 25.500Iveco S.p.A. 6.000Fiat S.p.A. 5.000CNH Italia s.p.a. 3.000Teksid S.p.A. 2.000Comau S.p.A. 1.500







(*) Assets held for sale. (*) Assets held for sale.


Fiat Partecipazioni (U.K.) Limited London United Kingdom 860,000 GBP 100.00 Fiat Partecipazioni S.p.A. 100.000Fiat Polska Sp. z o.o. Warsaw Poland 25,500,000 PLN 100.00 Fiat Partecipazioni S.p.A. 99.907

Fiat Auto Poland S.A. 0.029Magneti Marelli Suspension Systems Poland Sp. z o.o. 0.012Automotive Lighting Polska Sp. z o.o. 0.010Magneti Marelli Exhaust Systems Polska Sp. z o.o. 0.010Magneti Marelli Poland S.A. 0.010Teksid Iron Poland Sp. z o.o. 0.010Business Solutions Polska Sp. z o.o. 0.002CNH Polska Sp. z o.o. 0.002Comau Poland Sp. z o.o. 0.002Iveco Poland Ltd. 0.002Sadi Polska-Agencja Celna Sp. z o.o. 0.002Sirio Polska Sp. z o.o. 0.002

Fiat Servizi S.A. Paradiso Switzerland 100,000 CHF 100.00 IHF-Internazionale Holding Fiat S.A. 100.000Fiat U.S.A. Inc. New York U.S.A. 16,830,000 USD 100.00 Fiat S.p.A. 100.000Fiat-Revisione Interna S.c.r.l. Turin Italy 300,000 EUR 98.37 Fiat S.p.A. 51.000

Fiat Auto S.p.A. 15.000CNH Global N.V. 10.000Iveco S.p.A. 6.000Comau S.p.A. 2.000Ferrari S.p.A. 2.000Fiat Gesco S.p.A. 2.000Fiat Powertrain Technologies SpA 2.000Itedi-Italiana Edizioni S.p.A. 2.000Magneti Marelli Holding S.p.A. 2.000Maserati S.p.A. 2.000Teksid S.p.A. 2.000Fiat Finance S.p.A. 1.000Fiat Partecipazioni S.p.A. 1.000

IHF-Internazionale Holding Fiat S.A. Lugano Switzerland 100,000,000 CHF 100.00 Fiat S.p.A. 100.000Intermap (Nederland) B.V. Amsterdam Netherlands 200,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni Turin Italy 300,000 EUR 99.23 Fiat Partecipazioni S.p.A. 51.000

Fiat Auto S.p.A. 16.000Iveco S.p.A. 12.000CNH Italia s.p.a. 3.000Comau S.p.A. 3.000Fiat Gesco S.p.A. 3.000Fiat Powertrain Technologies SpA 3.000


Elasis-Società Consortile per Azioni Pomigliano d’Arco Italy 20,000,000 EUR 98.93 Fiat Auto S.p.A. 51.000C.R.F. Società Consortile per Azioni 27.933CNH Italia s.p.a. 6.800Fiat Powertrain Technologies SpA 5.000Iveco S.p.A. 3.300Comau S.p.A. 1.500Magneti Marelli Holding S.p.A. 1.500Fiat Partecipazioni S.p.A. 1.450Ferrari S.p.A. 1.100Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni 0.250Fiat S.p.A. 0.167

Fahag Immobilien-und Finanz-Gesellschaft AG Zurich Switzerland 500,000 CHF 100.00 IHF-Internazionale Holding Fiat S.A. 100.000Fast Buyer France S.a.r.l. Trappes France 7,700 EUR 100.00 Fast-Buyer S.p.A. 100.000Fast-Buyer S.p.A. Turin Italy 500,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Fiat Attività Immobiliari S.p.A. Turin Italy 65,700,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Fiat Auto Holdings B.V. in liquidatie Amsterdam Netherlands 1,000,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Fiat Financas Brasil Ltda Nova Lima Brazil 2,469,701 BRL 100.00 Fiat Finance S.p.A. 99.994

Fiat do Brasil S.A. 0.006Fiat Finance and Trade Ltd Luxembourg Luxembourg 251,494,000 EUR 100.00 Fiat Finance S.p.A. 99.993

Fiat Finance Canada Ltd. 0.007Fiat Finance Canada Ltd. Calgary Canada 10,099,885 CAD 100.00 Fiat Finance S.p.A. 100.000Fiat Finance Luxembourg S.A. Luxembourg Luxembourg 100,000 USD 100.00 Intermap (Nederland) B.V. 99.000

Fiat Netherlands Holding N.V. 1.000Fiat Finance North America Inc. Wilmington U.S.A. 40,090,010 USD 100.00 Fiat Finance S.p.A. 60.526

Fiat S.p.A. 39.474Fiat Finance S.p.A. Turin Italy 224,440,000 EUR 100.00 Fiat S.p.A. 100.000Fiat Information & Communication Services società consortile per azioni Turin Italy 800,000 EUR 98.06 Fiat S.p.A. 51.000

CNH Italia s.p.a. 10.000Fiat Auto S.p.A. 10.000Iveco S.p.A. 10.000Comau S.p.A. 3.000Ferrari S.p.A. 3.000Fiat Gesco S.p.A. 3.000Itedi-Italiana Edizioni S.p.A. 3.000Magneti Marelli Holding S.p.A. 3.000Teksid S.p.A. 3.000Fiat Partecipazioni S.p.A. 1.000

Fiat Netherlands Holding N.V. Amsterdam Netherlands 2,610,397,295 EUR 100.00 Fiat S.p.A. 60.563Fiat Partecipazioni S.p.A. 39.437

Fiat Partecipazioni S.p.A. Turin Italy 306,158,302 EUR 100.00 Fiat S.p.A. 100.000








Fiat-Revisione Interna S.c.r.l. 0.061Iveco Mezzi Speciali S.p.A. 0.061Fiat Center Italia S.p.A. 0.045eSPIN S.p.A. 0.040Fast-Buyer S.p.A. 0.040Itedi-Italiana Edizioni S.p.A. 0.039Maserati S.p.A. 0.039New Business 16 S.p.A. a socio unico 0.039Orione-Società Industriale per la Sicurezzae la Vigilanza Consortile per Azioni 0.039PDL Services S.r.l. 0.039Risk Management S.p.A. 0.039Sisport Fiat S.p.A. - Società sportiva dilettantistica 0.039Automotive Lighting Rear Lamps Italia S.p.A. 0.022Easy Drive S.r.l. 0.022Fiat Attività Immobiliari S.p.A. 0.022

Sisport Fiat S.p.A. - Società sportiva dilettantistica Turin Italy 2,720,800 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000


Fiat S.p.A. 3.000Magneti Marelli Holding S.p.A. 3.000Teksid S.p.A. 3.000

Neptunia Assicurazioni Marittime S.A. Lausanne Switzerland 10,000,000 CHF 100.00 Rimaco S.A. 100.000New Business 7 S.p.A. Turin Italy 11,899,524 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000New Business 8 S.p.A. Turin Italy 1,437,210 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Rimaco S.A. Lausanne Switzerland 350,000 CHF 100.00 IHF-Internazionale Holding Fiat S.A. 100.000SIRIO - Sicurezza Industriale Società consortile per azioni Turin Italy 120,000 EUR 92.59 Fiat Partecipazioni S.p.A. 57.177

Fiat Auto S.p.A. 17.415Iveco S.p.A. 4.583Fiat Powertrain Technologies SpA 2.356Magneti Marelli Powertrain S.p.A. 1.159Comau S.p.A. 0.751Fiat S.p.A. 0.751Ferrari S.p.A. 0.729Teksid S.p.A. 0.664Irisbus Italia S.p.A. 0.622Fiat Gesco S.p.A. 0.593Sistemi Sospensioni S.p.A. 0.551C.R.F. Società Consortile per Azioni 0.535New Holland Kobelco Construction Machinery S.p.A. 0.535Fiat Servizi per l`Industria S.c.p.a. 0.503Fiat Finance S.p.A. 0.449Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni 0.449Magneti Marelli Sistemi Elettronici S.p.A. 0.438Fidis S.p.A. 0.325CNH Italia s.p.a. 0.237Automotive Lighting Italia S.p.A. 0.233Editrice La Stampa S.p.A. 0.233Elasis-Società Consortile per Azioni 0.233Ingest Facility S.p.A. 0.233Magneti Marelli Sistemi di Scarico S.p.A. 0.218Astra Veicoli Industriali S.p.A. 0.103Fiat Information & Communication Services società consortile per azioni 0.103Servizi e Attività Doganali per l`Industria S.p.A. 0.103Magneti Marelli Holding S.p.A. 0.091Fiat Purchasing Italia S.r.l. 0.063








FL Auto Snc Trappes France 8,954,581 EUR 50.00 FC France S.A. 99.998FL Location SNC Paris France 76,225 EUR 49.99 FC France S.A. 99.980Leasys S.p.A. a socio unico Fiumicino Italy 77,499,400 EUR 50.00 Fidis Servizi Finanziari S.p.A. 100.000Savarent Società per Azioni a Socio Unico Turin Italy 21,000,000 EUR 50.00 Fidis Servizi Finanziari S.p.A. 100.000Sofice-Société de Financement des Concessionnaires s.a.s. (***) Trappes France 3,353,600 EUR 100.00 Fiat France 100.000TarCredit E.F.C. S.A. Alcalá De Henares Spain 16,671,569 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Tarfin S.A. Schlieren Switzerland 500,000 CHF 50.00 Fidis Servizi Finanziari S.p.A. 100.000Targasys Stock SA (***) Alcalá De Henares Spain 5,108,799 EUR 100.00 Fiat Auto España S.A. 100.000

G.E.I.E. Gisevel Paris France 15,200 EUR 50.00 Fiat France 50.000G.E.I.E.-Sevelind Paris France 15,200 EUR 50.00 Fiat France 50.000Nan Jing Fiat Auto Co. Ltd. Nanjing People’s Rep.of China 1,409,469,782 CNY 50.00 Fiat Auto S.p.A. 50.000Società Europea Veicoli Leggeri-Sevel S.p.A. Atessa Italy 68,640,000 EUR 50.00 Fiat Auto S.p.A. 50.000Société Européenne de Véhicules Légers du Nord-Sevelnord Société Anonyme Paris France 80,325,000 EUR 50.00 Fiat France 50.000Tofas-Turk Otomobil Fabrikasi Tofas A.S. Levent Turkey 500,000,000 TRY 37.86 Fiat Auto S.p.A. 37.856

n Agricultural and Construction EquipmentCase Mexico S.A. de C.V. São Pedro Mexico 810,000 MXN 44.86 CNH de Mexico SA de CV 100.000Case Special Excavators N.V. Zedelgem Belgium 1,100,000 EUR 44.86 CNH Global N.V. 50.000CNH Comercial, SA de C.V. São Pedro Mexico 160,050,000 MXN 44.86 CNH de Mexico SA de CV 100.000CNH de Mexico SA de CV São Pedro Mexico 165,276,000 MXN 44.86 CNH Global N.V. 50.000CNH Industrial, S.A. de C.V. São Pedro Mexico 200,050,000 MXN 44.86 CNH de Mexico SA de CV 100.000CNH Servicios Comerciales, S.A. de C.V. São Pedro Mexico 50,000,000 MXN 43.96 CNH Global N.V. 49.000CNH Servicios Corporativos S.A. de C.V. São Pedro Mexico 375,000 MXN 44.86 CNH de Mexico SA de CV 99.999Consolidated Diesel Company Whitakers U.S.A. 100 USD 44.86 CNH Engine Corporation 50.000LBX Company LLC Wilmington U.S.A. 0 USD 44.86 Case LBX Holdings Inc. 50.000L&T-Case Equipment Private Limited Mumbai India 240,100,000 INR 44.86 CNH America LLC 50.000Megavolt L.P. L.L.L.P. Wilmington U.S.A. 500,000 USD 35.88 CNH America LLC 40.000New Holland HFT Japan Inc. Sapporo Japan 240,000,000 JPY 44.86 CNH Global N.V. 50.000New Holland Trakmak Traktor A.S. Izmir Turkey 800,000 TRY 33.64 CNH Global N.V. 37.500Turk Traktor Ve Ziraat Makineleri A.S. Ankara Turkey 47,000,000 TRY 33.64 CNH Global N.V. 37.500

n Trucks and Commercial VehiclesIveco Fiat - Oto Melara Società consortile r.l. Rome Italy 40,000 EUR 50.00 Iveco S.p.A. 50.000Naveco Ltd. Nanjing People’s Rep.of China 2,527,000,000 CNY 50.00 Iveco S.p.A. 50.000SAIC IVECO Commercial Vehicle Investment Company Limited Shanghai People’s Rep.of China 50,000,000 USD 50.00 Iveco S.p.A. 50.000Transolver Finance Establecimiento Financiero de Credito S.A. Madrid Spain 9,315,500 EUR 50.00 Iveco S.p.A. 50.000


Jointly-controlled entities accounted for using the proportional consolidation n Powertrain TechnologiesFiat-GM Powertrain Polska Sp. z o.o. Bielsko-Biala Poland 220,100,000 PLN 50.00 Fiat Powertrain Technologies SpA 50.000

Jointly-controlled entities accounted for using the equity methodn Automobiles (**)Fiat Auto Financial Services S.p.A. Turin Italy 700,000,000 EUR 50.00 Fiat Auto S.p.A. 50.000FAL Fleet Services S.A.S. Trappes France 3,000,000 EUR 50.00 Fidis Servizi Finanziari S.p.A. 100.000FC France S.A. Trappes France 11,360,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 99.999Fiat Auto Contracts Ltd Slough Berkshire United Kingdom 16,000,000 GBP 50.00 Fidis Servizi Finanziari S.p.A. 100.000Fiat Auto Financial Services (Wholesale) Ltd. Slough Berkshire United Kingdom 3,500,000 GBP 50.00 Fidis Servizi Finanziari S.p.A. 100.000Fiat Auto Financial Services Limited Slough Berkshire United Kingdom 10,250,000 GBP 50.00 Fiat Auto Financial Services S.p.A. 100.000Fiat Auto Lease N.V. Amsterdam Netherlands 454,000 EUR 50.00 Fidis Servizi Finanziari S.p.A. 100.000Fiat Bank GmbH Heilbronn Germany 39,600,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fiat Bank Polska S.A. Warsaw Poland 125,000,000 PLN 50.00 Fiat Bank GmbH 100.000Fiat Credit Belgio S.A. Evere Belgium 3,718,500 EUR 50.00 Fidis Servizi Finanziari S.p.A. 99.999

Fidis Nederland B.V. 0.001Fiat Credit Hellas Commercial S.A. of Vehicles Argyroupoli Greece 600,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fiat Distribuidora Portugal S.A. (***) Alges Portugal 450,300 EUR 100.00 Fiat Auto Portuguesa S.A. 100.000Fiat Finance Holding S.A. Luxembourg Luxembourg 2,300,000 EUR 50.00 Fidis Servizi Finanziari S.p.A. 99.995

Fidis Nederland B.V. 0.005Fiat Finance S.A. Luxembourg Luxembourg 9,900,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 99.995

Fidis Finance (Suisse) S.A. 0.005Fiat Finansiering A/S Glostrup Denmark 13,000,000 DKK 50.00 Fiat Auto Financial Services S.p.A. 100.000Fiat Handlerservice GmbH (***) Heilbronn Germany 5,100,000 EUR 100.00 Fiat Automobil AG 100.000Fidis Credit Danmark A/S (***) Glostrup Denmark 500,000 DKK 100.00 Fiat Finance Netherlands B.V. 100.000Fidis Dealer Services B.V. (***) Utrecht Netherlands 698,000 EUR 100.00 Fiat Auto Nederland B.V. 100.000Fidis Finance (Suisse) S.A. Schlieren Switzerland 24,100,000 CHF 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Finance Polska Sp. z o.o. Warsaw Poland 10,000,000 PLN 50.00 Fidis Servizi Finanziari S.p.A. 100.000

Fiat Credit Hellas Commercial Fidis Insurance Consultants SA Argyroupoli Greece 60,000 EUR 49.99 S.A. of Vehicles 99.975Fidis Leasing GmbH Vienna Austria 40,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Leasing Polska Sp. z o.o. Warsaw Poland 12,500,000 PLN 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Nederland B.V. Utrecht Netherlands 3,085,800 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Retail Financial Services (Ireland) PLC Dublin Ireland 100,007 EUR 50.00 Fiat Auto Financial Services S.p.A. 99.994Fidis Retail IFIC SA Alges Portugal 10,000,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Retail Portugal Aluguer de Veiculos S.A. Alges Portugal 50,000 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Fidis Servizi Finanziari S.p.A. Turin Italy 80,349,266 EUR 50.00 Fiat Auto Financial Services S.p.A. 100.000Finplus Renting S.A. Alcalá De Henares Spain 2,225,884 EUR 50.00 Fidis Servizi Finanziari S.p.A. 100.000

% of Group % of


Jointly-controlled entities accounted for using the equity method (continued)% of



(**) The Fiat Group Consolidated Financial Statements include the valuation according to the equity method of the FAFS Group, which comprises FAFS S.p.A. and its subsidiaries listed below.(***) At December 31, 2006, subsidiary in accordance with article 2359 Civil Code, qualified as jointly-controlled entity for financial statements purpose, following the agreement with the partner Sofinco (Crédit Agricole Group).

(**) The Fiat Group Consolidated Financial Statements include the valuation according to the equity method of the FAFS Group, which comprises FAFS S.p.A. and its subsidiaries listed below.(***) At December 31, 2006, subsidiary in accordance with article 2359 Civil Code, qualified as jointly-controlled entity for financial statements purpose, following the agreement with the partner Sofinco (Crédit Agricole Group).


Subsidiaries accounted for using the equity methodn AutomobilesAlfa Romeo Inc. Orlando U.S.A. 3,000,000 USD 100.00 Fiat Auto S.p.A. 100.000Alfa Romeo Motors Ltd. Bangkok Thailand 160,000,000 THB 100.00 Fiat Auto S.p.A. 99.999Auto Italia Erfurt GmbH in liquidation Erfurt Germany 2,985,000 EUR 100.00 Fiat Automobil Vertriebs GmbH 100.000F.A. Austria Commerz GmbH Vienna Austria 37,000 EUR 100.00 Fiat Auto (Suisse) S.A. 100.000Fiat Auto Egypt Industrial Company SAE Giza Egypt 50,000,000 EGP 80.40 Fiat Auto S.p.A. 80.400Fiat Auto Egypt S.A.E. Giza Egypt 5,000,000 EGP 79.60 Fiat Auto Egypt Industrial Company SAE 99.000Fiat Auto S.A. de Ahorro para Fines Determinados Buenos Aires Argentina 24,535,149 ARS 100.00 Fiat Auto Argentina S.A. 100.000Fiat Auto Thailand Pvt. Ltd. Bangkok Thailand 276,000,000 THB 100.00 Fiat Auto S.p.A. 100.000Italcar SA Casablanca Morocco 28,000,000 MAD 99.94 Fiat Auto Maroc S.A. 99.986Sirio Polska Sp. z o.o. Bielsko-Biala Poland 1,350,000 PLN 100.00 Fiat Auto Poland S.A. 99.963

Fiat Polska Sp. z o.o. 0.037Zao Zernoproductpromsnabmechanizatsija Nizhnjy Novgorod Russia 24,660,000 RUR 73.14 Fiat Auto S.p.A. 73.139 73.127

n FerrariFerrari Financial Services, Inc. Wilmington U.S.A. 1,000 USD 76.50 Ferrari Financial Services S.p.A. 100.000

n Agricultural and Construction EquipmentFarmers New Holland Inc. Wilmington U.S.A. 800,000 USD 89.71 CNH America LLC 100.000Medicine Hat New Holland Ltd. Ottawa Canada 926,783 CAD 71.59 CNH Canada, Ltd. 79.800Memphis New Holland Inc. Wilmington U.S.A. 487,600 USD 86.79 CNH America LLC 96.739Northside New Holland Inc. Wilmington U.S.A. 250,000 USD 69.97 CNH America LLC 78.000Ridgeview New Holland Inc. Wilmington U.S.A. 534,000 USD 61.79 CNH America LLC 68.876Southside New Holland Tractor & Equipment, Inc. Wilmington U.S.A. 325,000 USD 89.71 CNH America LLC 100.000Sunrise Tractor & Equipment Inc. Wilmington U.S.A. 875,000 USD 70.85 CNH America LLC 78.971Tri-County New Holland Inc. Wilmington U.S.A. 400,000 USD 89.71 CNH America LLC 100.000

n Trucks and Commercial VehiclesAltra S.p.A. Genoa Italy 516,400 EUR 100.00 Iveco S.p.A. 100.000F. Pegaso S.A. Madrid Spain 993,045 EUR 100.00 Iveco España S.L. 100.000Financière Pegaso France S.A. Trappes France 260,832 EUR 100.00 Iveco España S.L. 100.000Iveco Colombia Ltda. Santa Fe’ de Bogota Colombia 7,596,249,000 COP 100.00 Iveco Venezuela C.A. 99.990

Iveco Latin America Ltda 0.010Iveco Plan S.A. de Ahorro para fines determinados Buenos Aires Argentina 153,000 ARS 100.00 Iveco Argentina S.A. 99.600

Fiat Argentina S.A. 0.400Iveco S.P.R.L. Kinshasa Congo (Dem. Rep. Congo) 340,235,000 CDF 100.00 Iveco S.p.A. 99.992

Astra Veicoli Industriali S.p.A. 0.008


n ComponentsGestamp Marelli Autochasis S.L. Barcelona Spain 2,000,000 EUR 50.00 Sistemi Sospensioni S.p.A. 50.000

n Metallurgical ProductsHua Dong Teksid Automotive Foundry Co. Ltd. Zhenjiang-Jangsu People’s Rep.of China 346,637,050 CNY 42.40 Teksid S.p.A. 50.000

Jointly-controlled entities accounted for using the equity method (continued)% of



% of Group % of



Subsidiaries valued at costn AutomobilesFiat Auto Espana Marketing Instituto Agrupacion de Interes Economico Alcalá De Henares Spain 30,051 EUR 95.00 Fiat Auto España S.A. 95.000Fiat Auto Marketing Institute (Portugal) ACE Alges Portugal 15,000 EUR 80.00 Fiat Auto Portuguesa S.A. 80.000New Business 21 S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Auto S.p.A. 100.000New Business 22 S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Auto S.p.A. 100.000New Business 23 S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Auto S.p.A. 100.000New Business 24 S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Auto S.p.A. 100.000Nuove Iniziative Finanziarie 2 S.r.l. Turin Italy 25,000 EUR 100.00 Fiat Auto S.p.A. 99.000

Fidis S.p.A. 1.000(*) Powertrain India Pvt. Ltd. in liquidation Mumbai India 101,000 INR 100.00 Fiat India Automobiles Private Limited 100.000

n FerrariScuderia Ferrari Club S.c. a r.l. Maranello Italy 105,000 EUR 81.47 Ferrari S.p.A. 95.848

n Agricultural and Construction EquipmentCase Credit Wholesale Pty. Limited St. Marys Australia 347,750 AUD 89.71 CNH Australia Pty Limited 100.000Fermec North America Inc. Wilmington U.S.A. 5 USD 89.71 CNH America LLC 100.000International Harvester Company Wilmington U.S.A. 1,000 USD 89.71 CNH America LLC 100.000J.I. Case Company Limited Basildon United Kingdom 2 GBP 89.71 Case United Kingdom Limited 100.000

n Trucks and Commercial VehiclesConsorzio per la Formazione Commerciale Iveco-Coforma Turin Italy 51,646 EUR 59.92 Iveco S.p.A. 50.000

Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni 10.000

Iran Magirus-Deutz Teheran Iran 180,000,000 IRR 100.00 Iveco Magirus AG 100.000Irisbus North America Limited Liability Company Las Vegas U.S.A. 20,000 USD 100.00 Iveco France 100.000Iveco Motors of China Limited Shanghai People’s Rep.of China 300,000 USD 100.00 Iveco S.p.A. 100.000M.R. Fire Fighting International S.A. Brasov Romenia 35,000,000 RON 75.88 Iveco Magirus Brandschutztechnik GmbH 74.000

Brandschutztechnik Gorlitz GmbH 1.000Iveco Magirus Fire Fighting GmbH 1.000

n ComponentsAutomotive Lighting Japan K.K. KohoKu-Ku-Yokohama Japan 10,000,000 JPY 99.99 Automotive Lighting Reutlingen GmbH 100.000Electromechanical Racing S.r.l. Corbetta Italy 100,000 EUR 99.99 Magneti Marelli Holding S.p.A. 100.000Magneti Marelli Automotive Magneti Marelli Components Components (India) Limited Pune India 125,000,000 INR 99.99 B.V. in liquidation 100.000


n ComponentsMagneti Marelli do Brasil

Cofap Fabricadora de Pecas Ltda Santo Andre Brazil 62,838,291 BRL 68.26 Industria e Comercio SA 68.350Seima Italiana Auto Svet Krasnig Oktjabr Kirz Russia 14,574,000 RUR 99.99 Automotive Lighting o.o.o. 99.167

Automotive Lighting Reutlingen GmbH 0.833

n Production SystemsComau AGS S.p.A. Grugliasco Italy 1,000,000 EUR 100.00 Comau S.p.A. 100.000Comau Service U.K. Ltd Watford United Kingdom 260,000 GBP 100.00 Comau S.p.A. 100.000

n ServicesCromos Consulenza e Formazione S.r.l. in liquidation Turin Italy 13,000 EUR 76.00 Business Solutions S.p.A. 76.000

n Holding companies and Other companiesCentro Studi sui Sistemi di Trasporto-CSST S.p.A. Turin Italy 520,000 EUR 89.92 Fiat Auto S.p.A. 49.000

Iveco S.p.A. 30.000C.R.F. Società Consortile per Azioni 11.000

European Engine Alliance EEIG Basildon United Kingdom 0 GBP 63.24 CNH U.K. Limited 33.333Iveco S.p.A. 33.333

Fiat (China) Business Co., Ltd. Beijing People’s Rep.of China 500,000 USD 100.00 Fiat Partecipazioni S.p.A. 100.000Isvor Fiat Società consortile di sviluppo

Isvor Dealernet S.r.l. in liquidation Turin Italy 10,000 EUR 99.39 e addestramento industriale per Azioni 80.000Fiat Auto S.p.A. 20.000

SGR-Sociedad para la Gestion de Riesgos S.A. Buenos Aires Argentina 10,000 ARS 99.96 Rimaco S.A. 99.960Sistemi Ambientali S.p.A. in liquidation Rivoli Italy 9,544,080 EUR 99.79 Fiat Partecipazioni S.p.A. 99.785

Subsidiaries accounted for using the equity method (continued)% of



% of Group % of




Nuove Iniziative Finanziarie 4 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Orione-Società Industriale per la Sicurezza e la Vigilanza Consortile per Azioni Turin Italy 120,000 EUR 98.88 Fiat Partecipazioni S.p.A. 78.262

Fiat S.p.A. 18.003Editrice La Stampa S.p.A. 0.439Fiat Auto S.p.A. 0.439CNH Italia s.p.a. 0.220Comau S.p.A. 0.220Fiat Finance S.p.A. 0.220Fiat Gesco S.p.A. 0.220Isvor Fiat Società consortile di sviluppo e addestramento industriale per Azioni 0.220Iveco S.p.A. 0.220Magneti Marelli Holding S.p.A. 0.220Sisport Fiat S.p.A. - Società sportiva dilettantistica 0.220


Magneti Marelli Electronic Systems (Asia) Limited Hong Kong People’s Rep.of China 10,000 HKD 99.99 Magneti Marelli Sistemi Elettronici S.p.A. 99.990

Magneti Marelli France S.a.s. 0.010Automotive Lighting Rear

Yorka Northamerica Corp. Southfield U.S.A. 10,000 USD 99.99 Lamps Mexico S. de r.l. de C.V. 100.000

n Production SystemsComau (Shanghai) International Trading Co. Ltd. Shanghai People’s Rep.of China 200,000 USD 100.00 Comau S.p.A. 100.000Comau U.K. Limited Telford United Kingdom 2,500 GBP 100.00 Comau S.p.A. 100.000Consorzio Fermag in liquidation Milan Italy 144,608 EUR 68.00 Comau S.p.A. 68.000Synesis Modugno Italy 20,000 EUR 75.00 Comau S.p.A. 75.000

n Services(*) CONSORZIO SERMAGEST - Servizi Manutentivi Gestionali Turin Italy 16,108 EUR 60.00 Ingest Facility S.p.A. 60.001Fiat Common Investment Fund Limited London United Kingdom 2 GBP 100.00 Fiat U.K. Limited 100.000PDL Services S.r.l. Turin Italy 105,000 EUR 100.00 Business Solutions S.p.A. 100.000

n Holding companies and Other companiesFast Buyer Middle East A.S. Bursa Turkey 350,230 TRY 98.80 Fast-Buyer S.p.A. 98.800Fiat Gra.De EEIG Watford United Kingdom 0 GBP 97.47 Fiat Auto S.p.A. 46.000

CNH Global N.V. 23.000Fiat Netherlands Holding N.V. 23.000Business Solutions S.p.A. 2.000Fiat S.p.A. 2.000Comau S.p.A. 1.000C.R.F. Società Consortile per Azioni 1.000Magneti Marelli Holding S.p.A. 1.000Teksid S.p.A. 1.000

Fiat Oriente S.A.E. in liquidation Cairo Egypt 50,000 EGP 100.00 Fiat Partecipazioni S.p.A. 100.000Fides Corretagens de Securos Ltda Nova Lima Brazil 365,525 BRL 100.00 Rimaco S.A. 99.998

Isvor Fiat Società consortile di sviluppo Isvor Fiat India Private Ltd. in liquidation New Delhi India 1,750,000 INR 99.23 e addestramento industriale per Azioni 100.000MC2 - Media Communications S.p.A. Turin Italy 219,756 EUR 51.00 Fiat Partecipazioni S.p.A. 51.000New Business 18 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000New Business 19 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000New Business 20 S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Nuova Immobiliare nove S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Nuova Immobiliare Otto S.r.l. Turin Italy 50,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000Nuova Immobiliare Tre S.p.A. Turin Italy 120,000 EUR 100.00 Fiat Partecipazioni S.p.A. 100.000


Subsidiaries valued at cost (continued)% of



Subsidiaries valued at cost (continued)% of




n Production SystemsGonzalez Production Systems Inc. Pontiac U.S.A. 10,000 USD 49.00 Comau Pico Holdings Corporation 49.000G.P. Properties I L.L.C. Pontiac U.S.A. 10,000 USD 49.00 Comau Pico Holdings Corporation 49.000

n ServicesServizio Titoli S.p.A. Turin Italy 126,000 EUR 27.24 Business Solutions S.p.A. 27.238

n Publishing and CommunicationsEditalia S.r.l. Caserta Italy 2,833,050 EUR 45.00 Editrice La Stampa S.p.A. 45.000Edizioni Dost S.r.l. Bologna Italy 1,042,914 EUR 40.00 Editrice La Stampa S.p.A. 40.000Società Editrice Mercantile S.r.l. Genoa Italy 4,247,000 EUR 40.00 Editrice La Stampa S.p.A. 40.000To-dis S.r.l. a socio unico Turin Italy 510,000 EUR 45.00 Editrice La Stampa S.p.A. 45.000

n Holding companies and Other companiesLivingstone Motor Assemblers Ltd. Livingstone Zambia 20,000,000 ZMK 20.00 Fiat Partecipazioni S.p.A. 20.000Rizzoli Corriere della Sera MediaGroup S.p.A. Milan Italy 762,019,050 EUR 9.90 Fiat Partecipazioni S.p.A. 9.895 10.291WorkNet S.p.A. Milan Italy 1,000,000 EUR 35.00 Fiat Partecipazioni S.p.A. 35.000


Associated companies accounted for using the equity methodn AutomobilesFiat Auto Kreditbank GmbH Vienna Austria 5,000,000 EUR 25.00 Fidis S.p.A. 25.000Fidis Bank G.m.b.H. Vienna Austria 4,740,000 EUR 25.00 Fidis S.p.A. 25.000Targasys S.r.l. Turin Italy 4,322,040 EUR 40.00 Fidis S.p.A. 40.000

n FerrariFerrari Maserati Cars International Trading (Shanghai) Co. Ltd. Shanghai People’s Rep.of China 3,000,000 USD 34.00 Ferrari S.p.A. 40.000Senator Software Gmbh Munich Germany 25,565 EUR 37.49 Ferrari Financial Services AG 49.000

n Agricultural and Construction EquipmentAl-Ghazi Tractors Ltd Karachi Pakistan 214,682,226 PKR 38.73 CNH Global N.V. 43.169CNH Capital Europe S.a.S. Puteaux France 88,482,297 EUR 44.77 CNH Global N.V. 49.900Employers Health Initiatives LLC Wilmington U.S.A. 0 USD 44.86 CNH America LLC 50.000Kobelco Construction Machinery Co. Ltd. Tokyo Japan 16,000,000,000 JPY 17.94 CNH Global N.V. 20.000New Holland Finance Ltd Basingstoke United Kingdom 2,900,001 GBP 43.96 CNH Global N.V. 49.000Rathell Farm Equipment Company Inc. Wilmington U.S.A. 640,000 USD 38.81 CNH America LLC 43.266

n Powertrain TechnologiesPowertrain Industrial Services S.C.R.L. in liquidation Turin Italy 100,000 EUR 50.00 Fiat Powertrain Technologies SpA 25.000

FMA - Fabbrica Motori Automobilistici S.r.l. 22.000Fiat Automoveis S.A. - FIASA 2.000Powertrain Mekanik Sanayi ve Ticaret Limited Sirketi 1.000

n Trucks and Commercial VehiclesGEIE V.IV.RE Boulogne France 0 EUR 50.00 Iveco S.p.A. 50.000Haveco Automotive Transmission Co. Ltd. Zhajiang People’s Rep.of China 200,010,000 CNY 33.33 Iveco S.p.A. 33.330Iveco Finance Holdings Limited Basingstoke United Kingdom 1,000 EUR 49.00 Iveco Partecipazioni Finanziarie S.r.l. 49.000Iveco Uralaz Ltd. Miass Russia 65,255,056 RUR 33.33 Iveco S.p.A. 33.330Iveco-Motor Sich, Inc. Zaporozhye Ukraine 26,568,000 UAH 38.62 Iveco S.p.A. 38.618Otoyol Sanayi A.S. Samandira-Kartal/Istanbul Turkey 52,674,386 TRY 27.00 Iveco S.p.A. 27.000V.IVE.RE Gruppo Europeo di Interesse Economico Turin Italy 0 EUR 50.00 Iveco S.p.A. 50.000

% of Group % of


Associated companies accounted for using the equity method (continued)% of




Isvor Fiat Società consortile di sviluppoAscai Servizi S.r.l. in liquidation Rome Italy 73,337 EUR 25.77 e addestramento industriale per Azioni 25.970Ciosa S.p.A. in liquidation Milan Italy 516 EUR 25.00 Fiat Partecipazioni S.p.A. 25.000Concordia Finance S.A. Luxembourg Luxembourg 13,137,000 EUR 29.46 Fiat Netherlands Holding N.V. 29.459Consorzio Parco Industriale di Chivasso Chivasso Italy 51,650 EUR 27.40 Fiat Partecipazioni S.p.A. 23.100

New Business 16 S.p.A. a socio unico 4.300Consorzio per lo Sviluppo delle Aziende Fornitrici in liquidation Turin Italy 241,961 EUR 30.92 CNH Italia s.p.a. 10.672

Fiat Auto S.p.A. 10.672Iveco S.p.A. 10.672

Consorzio Prode Naples Italy 51,644 EUR 34.63 Elasis-Società Consortile per Azioni 35.000Consorzio Scire Pomigliano d’Arco Italy 51,644 EUR 49.47 Elasis-Società Consortile per Azioni 50.000Consorzio Scuola Superiore per l’Alta Formazione Universitaria Federico II Naples Italy 127,500 EUR 19.79 Elasis-Società Consortile per Azioni 20.000Interfinanziaria S.A. Paradiso Switzerland 1,000,000 CHF 33.33 IHF-Internazionale Holding Fiat S.A. 33.330MB Venture Capital Fund I Participating Company F N.V. Amsterdam Netherlands 50,000 EUR 45.00 Fiat Partecipazioni S.p.A. 45.000Nuova Didactica S.c. a r.l. Modena Italy 112,200 EUR 24.92 Ferrari S.p.A. 16.364

CNH Italia s.p.a. 12.273Tecnologie per il Calcolo Numerico-Centro Superiore di Formazione S.c. a r.l. Trento Italy 100,000 EUR 24.82 C.R.F. Società Consortile per Azioni 25.000Zetesis S.p.A. in liquidation Milan Italy 283,150 EUR 40.00 Fiat Partecipazioni S.p.A. 40.000


Associated companies valued at costn AutomobilesConsorzio per la Reindustrializzazione Area di Arese S.r.l. in liquidation Arese Italy 1,020,000 EUR 30.00 Fiat Auto S.p.A. 30.000Fidis Rent GmbH Frankfurt Germany 50,000 EUR 49.00 Fiat Teamsys GmbH 49.000

n FerrariIniziativa Fiorano S.r.l. Modena Italy 90,000 EUR 28.33 Ferrari S.p.A. 33.333

n Agricultural and Construction EquipmentNido Industria Vallesina Ancona Italy 53,903 EUR 34.74 CNH Italia s.p.a. 38.728

n Trucks and Commercial VehiclesSotra S.A. Abidijan Ivory Coast 3,000,000,000 XAF 39.80 Iveco France 39.800Trucks & Bus Company Tajoura Libya 96,000,000 LYD 25.00 Iveco España S.L. 25.000Zastava-Kamioni D.O.O. Kragujevac Serbia 1,673,505,893 YUM 33.68 Iveco S.p.A. 33.677

n ComponentsFlexider S.p.A. Turin Italy 4,131,655 EUR 25.00 Magneti Marelli Holding S.p.A. 25.000Mars Seal Private Limited Mumbai India 400,000 INR 24.00 Magneti Marelli France S.a.s. 24.000Matay Otomotiv Yan Sanay Ve Ticaret A.S. Istanbul Turkey 2,400,000 TRY 28.00 Magneti Marelli Holding S.p.A. 28.000M.I.P.-Master Imprese Politecnico Milan Italy 20,658 EUR 50.00 Magneti Marelli Holding S.p.A. 50.000

n Production SystemsConsorzio Generazione Forme-CO.GE.F. San Mauro Torinese Italy 15,494 EUR 33.33 Comau S.p.A. 33.333

n ServicesFMA-Consultoria e Negocios Ltda São Paulo Brazil 1 BRL 50.00 Fiat do Brasil S.A. 50.000(*) S.I.MA.GEST2 Società Consortile a Responsabilità Limitata Zola Predosa Italy 50,000 EUR 30.00 Ingest Facility S.p.A. 30.000Società Cooperativa Delta Cromos Consulenza e FormazionePiù r.l. in liquidation Trieste Italy 44,865 EUR 34.96 S.r.l. in liquidation 46.000

n Publishing and CommunicationsLe Monde Europe S.A.S. Paris France 5,024,274 EUR 48.44 La Stampa Europe SAS 48.443Le Monde Presse S.A.S. Paris France 7,327,930 EUR 27.28 La Stampa Europe SAS 27.277

n Holding companies and Other companiesAgenzia Internazionalizzazione Imprese Torino S.r.l. in liquidation Turin Italy 102,000 EUR 35.00 Fiat Partecipazioni S.p.A. 35.000

% of Group % of


Associated companies valued at cost (continued)% of





Other companies valued at costn Agricultural and Construction EquipmentPolagris S.A. Pikieliszki Lithuania 1,133,400 LTT 9.92 CNH Polska Sp. z o.o. 11.054

n Trucks and Commercial VehiclesConsorzio Spike Genoa Italy 90,380 EUR 15.00 Iveco S.p.A. 15.000

n Holding companies and Other companiesCentro di Eccellenza su Metodi e Sistemi per le Aziende Competitive Fisciano Italy 225,000 EUR 15.83 Elasis-Società Consortile per Azioni 16.000Consorzio Calef (Consorzio per la ricerca e lo sviluppo delle applicazioni industriali laser e del fascio elettronico) Rotondella Italy 83,445 EUR 10.44 Elasis-Società Consortile per Azioni 5.319

C.R.F. Società Consortile per Azioni 5.213Consorzio Lingotto Turin Italy 9,612 EUR 16.90 Fiat Attività Immobiliari S.p.A. 11.500

Fiat S.p.A. 5.400Consorzio Technapoli Naples Italy 1,626,855 EUR 10.99 Elasis-Società Consortile per Azioni 11.110Ercole Marelli & C. S.p.A. in liquidation Milan Italy 9,633,000 EUR 13.00 Fiat Partecipazioni S.p.A. 13.000Euromedia Luxembourg One S.A. in liquidation Luxembourg Luxembourg 44,887,500 USD 14.29 Fiat Netherlands Holding N.V. 14.286Expo 2000 - S.p.A. Turin Italy 2,205,930 EUR 18.95 Fiat Partecipazioni S.p.A. 18.949Fin.Priv. S.r.l. Milan Italy 20,000 EUR 14.29 Fiat S.p.A. 14.285Sorore Ricerche per Santa Maria della Scala Siena Italy 9,296 EUR 16.66 Fiat Partecipazioni S.p.A. 16.663Torino Zerocinque Investment S.p.A. Milan Italy 2,755,000 EUR 17.62 Fiat Partecipazioni S.p.A. 17.620Torino Zerocinque Trading S.p.A. Milan Italy 2,425,000 EUR 15.04 Fiat Partecipazioni S.p.A. 15.040

% of Group % of


I am enough of an artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imaginationencircles the world. Albert Einstein

Fiat S.p.A.Financial Statements at December 31, 2006

234 Financial Review of Fiat S.p.A.

238 Income Statement

239 Balance Sheet

240 Statement of Cash Flows

241 Statement of Changes in Stockholders’ Equity

242 Income Statement pursuant to Consob Resolution No. 15519 of July 27, 2006

243 Balance Sheet pursuant to Consob Resolution No. 15519 of July 27, 2006

244 Notes to the Financial Statements

301 Appendix – Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS)

Financial Review of Fiat S.p.A. 235Financial Review of Fiat S.p.A.234234

Financial Review of Fiat S.p.A.The financial statements illustrated and commented on in the following pages have been prepared on the basis of the company’sstatutory financial statements at December 31, 2006 to which reference should be made. In compliance with European Regulationno. 1606 of July 19, 2002, starting from 2005 the Fiat Group has adopted International Financial Reporting Standards (“IFRS”)issued by the International Accounting Standards Board (“IASB”) in the preparation of its consolidated financial statements. On thebasis of national laws implementing that Regulation, starting from 2006 the Parent Company Fiat S.p.A. is presenting its financialstatements in accordance with IFRS, which are reported together with comparative figures for the previous year.

Operating PerformanceThe Parent Company earned net income of 2,343 million euros in 2006, 1,226 million euros higher than in 2005 when the resultincluded net non-recurring income of 1,714 million euros.

The company’s Income Statement is summarised in the following table:


Investment income 2,461 (424)- Dividends 362 8- (Impairment losses) reversals 2,099 (431)- Gains (losses) on disposals – (1)Personnel and operating costs net of other revenues (120) (109)Income (expenses) from significant non-recurring transactions – 1,133 Financial income (expenses) (24) (62)Financial income from significant non-recurring transactions – 858Income taxes 26 (279)Net income 2,343 1,117

Investment income totals 2,461 million euros compared with investment expense of 424 million euros in 2005 and consistsof dividends received during the period and reversal of impairment losses (net of write-downs) of investments. Specifically:

n Dividends total 362 million euros and were received from the subsidiaries IHF – Internazionale Holding Fiat S.A. (259 millioneuros), Fiat Finance S.p.A. (75 million euros) and other companies. In 2005 dividends received from investments totalled 8 millioneuros.

n Impairment loss reversals (net of write-downs) of 2,099 million euros resulted from the revaluation of the investments in thesubsidiaries Fiat Partecipazioni S.p.A. (1,388 million euros mainly connected to Fiat Auto), Iveco S.p.A. (946 million euros) and FiatNetherlands Holding N.V. (96 million euros connected to CNH), all written-down in previous years, net of the impairment lossrecognised on the investment in Comau S.p.A. (330 million euros).

In 2005, net impairment losses recognised on investments totalled 431 million euros, mainly due to losses from the investments in Fiat Partecipazioni S.p.A. (811 million euros connected mainly to the losses of Fiat Auto), Teksid S.p.A., Comau S.p.A. and

Business Solutions S.p.A. (for a total of 147 million euros), net of the revaluation of the investments held in Fiat Netherlands Holding N.V. (376 million euros due to the positive performance of the CNH and Iveco subsidiaries), Magneti Marelli Holding S.p.A. (144 million euros) and minor companies.

Personnel and operating costs net of other revenues total 120 million euros, compared with 109 million euros in 2005.

Specifically:

n Personnel and operating costs, totalling 199 million euros, comprise 58 million euros in personnel costs (60 million eurosin 2005), and 141 million euros in other operating costs (121 million euros in 2005), which include the costs for services,amortisation and depreciation and other operating costs. These costs increased as a whole by 18 million euros from 2005as a result of non-recurring charges. In 2006, the average headcount was 140 employees, compared with an average of 133employees in 2005.

n Other revenues, totalling 79 million euros (72 million euros in 2005), principally refer to the change in contract work in progress(agreements between Fiat S.p.A. and Treno Alta Velocità – T.A.V. S.p.A.), which is measured by applying the percentage ofcompletion to the total contractual value of the work, to royalties for the use of the Fiat trademark, calculated as a percentageof the revenues generated by the Group companies that use it, and the services of executives at the principal companies of theGroup. The increase from 2005 is mainly attributable to higher charges for the use of the trademark.

No Income (expenses) from significant non-recurring transactions is reported in 2006. In 2005 a gain of 1,133 million euros(net of related costs) was recorded on the transaction regarding the termination of the Master Agreement with General Motors.

In 2006, there were net financial expenses of 24 million euros, arising from the interest charges on the Company’s debt, whichwas partially offset by the gain resulting from derivative financial instruments.In 2005 there were net expenses of 62 million euros mainly arising from the interest expenses connected with the MandatoryConvertible Facility.

No Financial income from significant non-recurring transactions is reported in 2006. In 2005 this item included income of 858million euros resulting from the capital increase of September 20, 2005 with the simultaneous conversion of the MandatoryConvertible Facility. The income represents the difference between the subscription price of the new shares issued and the stockmarket price of the shares at the subscription date, net of issuance costs.

The income tax revenue of 26 million euros is the net result of the remuneration for the tax loss brought into the national taxconsolidation by Fiat S.p.A. in 2006 to offset the income reported by the Group’s Italian companies, and the IRAP chargerecognised for the period.Income tax expenses of 279 million euros in 2005 consisted of the reversal of deferred tax assets of 277 million euros, recognisedin the financial statements at December 31, 2004 in relation to the settlement subsequently made with General Motors for thetermination of the Master Agreement.

Financial Review of Fiat S.p.A.236 Financial Review of Fiat S.p.A. 237236

Balance SheetHighlights of the Parent Company’s Balance Sheet are illustrated in the following table:

At At(in millions of euros) December 31, 2006 December 31, 2005

Non-current assets 14,559 5,168- of which: Investments 14,500 5,118Working capital 167 303Total net invested capital 14,726 5,471Stockholders’ equity 10,374 7,985Net debt (liquid funds) 4,352 (2,514)

Non-current assets mainly include investments in the relevant subsidiaries of the Group.

The net increase of 9,382 million euros in investments as compared to December 31, 2005 stems from net write-ups arising fromthe reversal of previously recognised impairment losses and recapitalisations of 6,361 million euros carried out during the year inthe subsidiaries Fiat Partecipazioni S.p.A. (6,000 million euros), Fiat Netherlands Holding N.V. (121 million euros) and Comau S.p.A.(240 million euros), in order to re-balance the equity structure inside the Group and cover losses, as well as the re-purchase fromMediobanca S.p.A. of 28.6% of the shares of Ferrari S.p.A. (893 million euros) upon exercise of the call option provided for in the2002 agreements, which brought the investment to an 85% stake.

Working capital, which totalled 167 million euros, consists of inventories net of advances received, trade, tax and employeereceivables/payables, other receivables/payables and provisions. The 136 million euro decrease over December 31, 2005 is mainlyattributable to the refund of VAT receivables by the Tax Authorities.

Stockholders’ equity at December 31, 2006 totalled 10,374 million euros, reflecting an increase of 2,389 million euros as comparedto December 31, 2005 due to the positive result of the year (2,343 million euros) and other minor changes (including 28 millioneuros resulting from marking to market the fair value carrying amount of the Mediobanca shareholding).

For a more complete analysis of the changes in stockholders’ equity, reference should be made to the relevant table set out in thefollowing pages as part of the statutory financial statements of the Parent Company Fiat S.p.A.

Net debt totalled 4,352 million euros at December 31, 2006 compared with net liquid funds of 2,514 million euros at December 31,2005. The use of the liquid funds balance at the beginning of the year and the subsequent accumulation of debt are theconsequence of the previously mentioned recapitalisations of subsidiaries and purchase of Ferrari S.p.A. shares. A breakdown ofnet debt is illustrated in the following table:

At At(in millions of euros) December 31, 2006 December 31, 2005

Financial receivables, cash and cash equivalents (85) (3,076)Current financial payables 1,627 557Non-current financial payables 2,810 5Net debt (net liquid funds) 4,352 (2,514)

Current financial payables consist of the overdraft with the subsidiary Fiat Finance S.p.A. and short-term financing received fromthat company, as well as payables to factoring companies for advances on receivables. Non-current financial payables consistalmost entirely of loans repayable in the 2010-2013 period granted by the subsidiary Fiat Finance S.p.A. at market rates as partof the recapitalisation of subsidiaries discussed above.At December 31, 2005 financial receivables related to short-term financing of 2,700 million euros granted to the subsidiary FiatFinance S.p.A. and due in 2006, and to cash deposited on the current account held with that company.

For a more complete analysis of cash flows, reference should be made to the Statement of Cash Flows set out on the followingpages as part of the statutory financial statements of the Parent Company Fiat S.p.A.

Reconciliation between the Parent Company’s equity and its result for the year with those of the GroupPursuant to the Consob Communication of July 28, 2006, set out below is a reconciliation between the Parent Company’s equityat December 31, 2006 and its result for the year then ended with those of the Group (Group interest).

Stockholders’ equity at(in millions of euros) December 31, 2006 2006 Net result

Financial Statements of Fiat S.p.A. 10,374 2,343 Elimination of the carrying amounts of consolidated investments and the respective dividendsfrom the financial statements of Fiat S.p.A. (14,211) (346) Elimination of the reversal of impairment losses (net of recognised impairment losses) of consolidated investments – (2,099) Equity and results of consolidated subsidiaries 13,404 1,229 Consolidation adjustments:Elimination of intercompany profits and losses on the sale of investments – (41)Elimination of intercompany profits and losses in inventories and fixed assets and other adjustments (205) (21)Consolidated financial statements (Group interest) 9,362 1,065

Fiat S.p.A. Financial Statements at December 31, 2006238 Fiat S.p.A. Financial Statements at December 31, 2006 239

(in euros) Note At December 31, 2006 At December 31, 2005

ASSETSNon-current assetsIntangible assets (11) 771,530 675,599Property, plant and equipment (12) 37,252,689 39,658,553Investments (13) 14,499,594,748 5,117,531,801Other financial assets (14) 20,134,319 5,335,175Other non-current assets (15) 1,573,473 4,501,747Deferred tax assets (10) – –Total Non-current assets 14,559,326,759 5,167,702,875Current assetsInventories (27) – –Trade receivables (16) 154,692,452 215,652,499Current financial receivables (17) 84,173,202 3,075,893,885Other current receivables (18) 626,428,489 799,919,053Cash and cash equivalents (19) 608,105 495,235Total Current assets 865,902,248 4,091,960,672Assets held for sale – –TOTAL ASSETS 15,425,229,007 9,259,663,547STOCKHOLDERS’ EQUITY AND LIABILITIESStockholders’ equity (20)

Capital stock 6,377,257,130 6,377,257,130Additional paid-in capital 1,540,856,410 681,856,410Reserve under law no. 413/1991 22,590,857 22,590,857Legal reserve 446,561,763 446,561,763Reserve for treasury stock in portfolio 24,138,811 27,709,936Extraordinary reserve 6,134,851 334,633Retained earnings (losses) (553,411,863) (811,736,863)Treasury stock (24,138,811) (27,709,936)Gains (losses) recognised directly in equity 162,764,566 134,267,390Stock option reserve 27,399,708 16,102,522Net result 2,343,374,972 1,117,325,000Total Stockholders’ equity 10,373,528,394 7,984,558,842Non-current liabilitiesProvisions for employee benefits and other non-current provisions (21) 18,104,487 29,170,653Non-current financial payables (22) 2,810,029,000 5,262,000Other non-current liabilities (23) 20,000,576 16,861,109Deferred tax liabilities (10) 3,438,000 –Total Non-current liabilities 2,851,572,063 51,293,762Current liabilitiesProvisions for employee benefits and other current provisions (24) 26,790,951 30,990,501Trade payables (25) 184,660,883 385,182,033Current financial payables (26) 1,627,429,902 557,382,830Other payables (27) 361,246,814 250,255,579Total Current liabilities 2,200,128,550 1,223,810,943Liabilities held for sale – –TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 15,425,229,007 9,259,663,547

(*) Pursuant to Consob resolution no. 15519 of July 27, 2006 effects of transactions with related parties on the Balance Sheet of Fiat S.p.A. are included in the specific balance sheet schedulereported in the following pages and also provided in the comments of the single items and in Note 30.

(in euros) Note 2006 2005

Dividends and other income from investments (1) 362,418,522 7,713,904(Impairment losses) reversal of impairment losses of investments (2) 2,099,350,000 (430,788,686)Gains (losses) on the disposal of investments (3) 425,380 (1,300,134)Other operating income (4) 79,238,202 72,853,610Personnel costs (5) (57,899,516) (60,027,274)Other operating costs (6) (141,006,254) (121,360,013)Income (expenses) from significant non-recurring transactions (7) – 1,133,110,377Financial income (expenses) (8) (24,846,809) (61,685,499)Financial income from significant non-recurring transactions (9) – 857,636,269Result before taxes 2,317,679,525 1,396,152,554Income taxes (10) (25,695,447) 278,827,554Result from continuing operations 2,343,374,972 1,117,325,000Result from discontinued operations – –Net result 2,343,374,972 1,117,325,000

(*) Pursuant to Consob resolution no. 15519 of July 27, 2006 effects of transactions with related parties on the Income Statement of Fiat S.p.A. are included in the specific income statementschedule reported in the following pages and also provided in the comments of the single items and in Note 30.

Income Statement Balance Sheet(*) (*)

Fiat S.p.A. Financial Statements at December 31, 2006 241Fiat S.p.A. Financial Statements at December 31, 2006240

Statement of Changesin Stockholders’ Equity

Capital increasefor conversion Fair value

of the Mandatory adjustments Valuation of stockAt Convertible recognised directly option plans and Net result for the At

(in thousands of euros) December 31, 2004 Facility in equity other changes period December 31, 2005

Capital stock 4,918,113 1,459,144 6,377,257Additional paid-in capital – 681,856 681,856Reserve under law no. 413/1991 22,591 22,591Legal reserve 446,562 446,562Reserve for treasury stock in portfolio 26,413 1,297 27,710Extraordinary reserve 1,632 (1,297) 335Retained earnings (losses) (813,435) 1,698 (811,737)Treasury stock (26,413) (1,297) (27,710)Gains (losses) recognised directly in equity 74,397 59,870 134,267Stock option reserve 6,062 10,041 16,103Net result for the period 1,117,325 1,117,325Total Stockholders’ equity 4,655,922 2,141,000 59,870 10,442 1,117,325 7,984,559

(*) Treasury stock at December 31, 2005 consists of 4,331,708 ordinary shares for a total nominal value of 21,659 thousand euros.

Allocation Fair valueof the net result adjustments Valuation of stock

At for the prior recognised directly option plans and Net result for the AtDecember 31, 2005 period in equity other changes period December 31, 2006

Capital stock 6,377,257 6,377,257Additional paid-in capital 681,856 859,000 1,540,856Reserve under law no. 413/1991 22,591 22,591Legal reserve 446,562 446,562Reserve for treasury stock in portfolio 27,710 (3,571) 24,139Extraordinary reserve 335 5,800 6,135Retained earnings (losses) (811,737) 258,325 (553,412)Treasury stock (27,710) 3,571 (24,139)Gains (losses) recognised directly in equity 134,267 28,497 162,764Stock option reserve 16,103 11,297 27,400Net result for the period 1,117,325 (1,117,325) 2,343,375 2,343,375Total Stockholders’ equity 7,984,559 – 28,497 17,097 2,343,375 10,373,528

(*) Treasury stock at December 31, 2006 consists of 3,773,458 ordinary shares for a total nominal value of 18,867 thousand euros.


A) Cash and cash equivalents at beginning of period 495 325B) Cash flows from (used in) operating activities during the period:

Net result for the period 2,343,375 1,117,325Amortisation and depreciation 2,882 2,918Non-cash gain from extinguishment of the Mandatory Convertible Facility – (859,000)Non-cash stock option costs 11,297 10,041(Impairment losses) reversals of impairment losses of investments (2,099,350) 430,789Capital losses/gains on the disposal of investments (329) (93)Change in provisions for employee benefits and other provisions 7,990 2,100Change in deferred taxes 3,438 277,000Change in working capital 151,872 (76,028)Total 421,175 905,052

C) Cash flows from (used in) investment activities:Investments:- Recapitalisations of subsidiaries (6,361,126) (165,193)- Acquisitions (919,412) –Other investments (tangible and intangible assets and other financial assets) (15,529) (1,808)Proceeds from the sale of:- Investments 2,357 –- Other non-current assets (tangible, intangible and other) 313 261Total (7,293,397) (166,740)

D) Cash flows from (used in) financing activities:Change in current financial receivables 2,991,721 (753,091)Change in non-current financial payables 2,804,767 –Change in current financial payables 1,070,047 14,548Capital increase (a) – –Sale of treasury stock 5,800 401Dividend distribution – –Total 6,872,335 (738,142)

E) Total change in cash and cash equivalents 113 170F) Cash and cash equivalents at end of period 608 495

(a) In 2005, the item “Capital increase” is shown net of the repayment of the Mandatory Convertible Facility (3 billion euros), as it did not give rise to cash flows.

Statement of Cash Flows

(*)

(*)

Statement of total recognised income and expenses for 2006 and 2005


Gains (losses) recognised directly in the fair value reserve (investments in other companies) 28,497 58,958Gains (losses) recognised directly in equity 28,497 58,958Transfer from cash flow hedge reserve – 912Net result for the period 2,343,375 1,117,325Total of recognised income (expense) for the period 2,371,872 1,177,195

Fiat S.p.A. Financial Statements at December 31, 2006 243Fiat S.p.A. Financial Statements at December 31, 2006242

Balance Sheetpursuant to Consob Resolution No. 15519 of July 27, 2006

of whichAt December 31, Related parties At December 31, of which

(in thousands of euros) Note 2006 (Note 30) 2005 Related parties

ASSETSNon-current assetsIntangible assets (11) 772 676Property, plant and equipment (12) 37,253 39,658Investments (13) 14,499,595 5,117,532Other financial assets (14) 20,134 10,029 5,335 5,262Other non-current assets (15) 1,573 4,502Deferred tax assets (10) – –Total Non-current assets 14,559,327 5,167,703Current assetsInventories (27) – –Trade receivables (16) 154,692 2,408 215,652 7,687Current financial receivables (17) 84,173 84,173 3,075,894 3,075,894Other current receivables (18) 626,429 146,908 799,920 106,007Cash and cash equivalents (19) 608 495Total Current assets 865,902 4,091,961Assets held for sale – –TOTAL ASSETS 15,425,229 9,259,664STOCKHOLDERS’ EQUITY AND LIABILITIESStockholders’ equity (20)

Capital stock 6,377,257 6,377,257Additional paid-in capital 1,540,856 681,856Reserve under law no. 413/1991 22,591 22,591Legal reserve 446,562 446,562Reserve for treasury stock in portfolio 24,139 27,710Extraordinary reserve 6,135 335Retained earnings (losses) (553,412) (811,737)Treasury stock (24,139) (27,710)Gains (losses) recognised directly in equity 162,765 134,267Stock option reserve 27,400 16,103Net result 2,343,375 1,117,325Total Stockholders’ equity 10,373,529 7,984,559Non-current liabilitiesProvisions for employee benefits and other non-current provisions (21) 18,104 29,171Non-current financial payables (22) 2,810,029 2,810,029 5,262 5,262Other non-current liabilities (23) 20,001 – 16,861 2,622Deferred tax liabilities (10) 3,438 –Total Non-current liabilities 2,851,572 51,294Current liabilitiesProvisions for employee benefits and other current provisions (24) 26,791 30,991Trade payables (25) 184,661 17,801 385,182 4,975Current financial payables (26) 1,627,430 1,405,554 557,383 434Other payables (27) 361,246 319,078 250,255 215,379Total Current liabilities 2,200,128 1,223,811Liabilities held for sale – –TOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 15,425,229 9,259,664

Income Statement pursuant to Consob Resolution No. 15519 of July 27, 2006

of whichRelated parties of which

(in thousands of euros) Note 2006 (Note 30) 2005 Related parties

Dividends and other income from investments (1) 362,419 7,714(Impairment losses) reversal of impairment losses of investments (2) 2,099,350 (430,789)Gains (losses) on the disposal of investments (3) 425 (1,300)Other operating income (4) 79,238 33,200 72,854 24,256Personnel costs (5) (57,900) (60,027)Other operating costs (6) (141,006) (51,901) (121,360) (54,477)Income (expenses) from significant non-recurring transactions (7) – 1,133,110Financial income (expenses) (8) (24,847) (17,765) (61,685) 106,259Financial income from significant non-recurring transactions (9) – 857,636Result before taxes 2,317,679 1,396,153Income taxes (10) (25,696) 278,828Result from continuing operations 2,343,375 1,117,325Result from discontinued operations – –Net result 2,343,375 1,117,325

Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements 245Fiat S.p.A. Financial Statements at December 31, 2006 - Notes to the Financial Statements244

Group’s financial statements. The investment portfolios offinancial services companies are included in current assetsin the Consolidated Balance Sheet, as the investments willbe realised in their normal operating cycle. Financial servicescompanies, though, obtain funds only partially from themarket: the remaining are obtained through the Group’streasury companies (included in industrial companies), whichlend funds both to industrial Group companies and to financialservices companies as the need arises. This financial servicestructure within the Group means that any attempt to separatecurrent and non-current debt in the Consolidated BalanceSheet cannot be meaningful. This has no effect on thepresentation of the liabilities of Fiat S.p.A.

The statement of cash flows has been prepared using theindirect method.

In connection with the requirements of the Consob ResolutionNo. 15519 of July 27, 2006 as to the format of the financialstatements, specific supplementary Income Statement andBalance Sheet formats have been added for related partytransactions, so as not to compromise the overall readingof the statements.

Intangible assetsPurchased and internally-generated intangible assets arerecognised as assets in accordance with IAS 38 - IntangibleAssets, where it is probable that the use of the asset willgenerate future economic benefits and where the cost of theasset can be determined reliably.

Intangible assets with finite useful lives are measured atpurchase or manufacturing cost, net of amortisation chargedon a straight-line basis over their estimated useful lives andnet of any impairment losses.


CostProperty, plant and equipment is measured at purchase ormanufacturing cost, net of accumulated depreciation and anyimpairment losses, and is not revalued.Subsequent expenditures are capitalised only if they increasethe future economic benefits embodied in the asset to whichthey relate. All other expenditures are expensed as incurred.

Assets are depreciated using the policies and rates describedbelow.

Lease arrangements in which the lessor maintains substantiallyall the risks and rewards incidental to the ownership of anasset are classified as operating leases. Lease payments underan operating lease are recognised as an expense on a straight-line basis over the lease term.

DepreciationDepreciation is charged on a straight-line basis over theestimated useful lives of assets as follows:

Annual depreciation rate

Buildings 3%Plant 10%Furniture 12%Fixtures 20%Vehicles 25%

Land is not depreciated.

Impairment of assetsThe company reviews at least annually the recoverability ofthe carrying amount of intangible assets, property, plant andequipment and investments in subsidiaries and associates, inorder to determine whether there is any indication that thoseassets have suffered an impairment loss. If any such indicationexists, the carrying amount of an asset is written down to itsrecoverable amount.The recoverable amount of an asset is the higher of fair valueless costs to sell and its value in use.

In particular, in assessing whether investments in subsidiariesand associated companies have been impaired, theirrecoverable amount has been taken as their value in use, asthe investments are not listed and a market value (fair valueless costs to sell) cannot be reliably measured. The value inuse of an investment is determined by estimating the presentvalue of the estimated cash flows expected to arise from theresults of the investment and from the estimated value of itsultimate disposal, in line with the requirements of paragraph33 of IAS 28.

Principal activitiesFiat S.p.A. (the “Company”) is a corporation organised underthe laws of the Republic of Italy and is the Parent Companyof the Fiat Group, holding investments, either directly orindirectly through subholdings, in the capital of the parentcompanies of business Sectors in which the Fiat Groupoperates.

The head office of the company is in Turin, Italy.

The financial statements of Fiat S.p.A. are prepared in euroswhich is the currency of the economic environment in whichthe company operates.

The Balance Sheet and Income Statement are presentedin euros, while the Statement of Cash Flows, the Statementof Changes in Stockholders’ Equity, the Statement of TotalRecognised Income and Expenses and the amounts statedin the Notes are presented in thousands of euros, unlessotherwise stated.

As the Parent Company, Fiat S.p.A. has additionally preparedthe consolidated financial statements of the Fiat Group atDecember 31, 2006.

Significant accounting policies

Basis of preparationThe 2006 financial statements are the separate financialstatements of the Parent Company, Fiat S.p.A., and havebeen prepared in accordance with the International FinancialReporting Standards (“IFRS”) issued by the InternationalAccounting Standards Board (“IASB”) and adopted by theEuropean Union. The designation “IFRS” also includes allthe revised International Accounting Standards (“IAS”) andall the interpretations of the International Financial ReportingInterpretations Committee (“IFRIC”), previously known asthe Standing Interpretations Committee (“SIC”).

In compliance with European Regulation no. 1606 of July 19,2002, starting from 2005 the Fiat Group has adopted theInternational Financial Reporting Standards (“IFRS”) issued bythe International Accounting Standards Board (“IASB”) for thepreparation of its consolidated financial statements. On the

basis of national legislation implementing that Regulation,the annual statutory accounts of the Parent Company FiatS.p.A. as of December 31, 2006 have been prepared for the firsttime also using those accounting standards. As a consequencethe Parent Company Fiat S.p.A. is presenting its financialstatements for 2006 and its comparative figures for the prioryear in accordance with IFRS. The accounting principlesapplied are the same as those used in the preparation of theCompany’s Balance Sheets at January 1, 2005 andDecember 31, 2005 and its 2005 Income Statement inaccordance with IFRS; these statements are provided in theAppendix attached to these Notes, to which reference shouldbe made. The Appendix provides reconciliations of theCompany’s equity and Income Statement reported under itsprevious accounting principles (Italian accounting principles)and IFRS, together with Notes, as required by IFRS 1 – First-time adoption of IFRS.

Certain reclassifications have been made with respect to thefigures published in the Appendix to the 2006 First-half Report.The comparative figures for the previous period wereconsequently reclassified. These reclassifications have noeffect on the net result or stockholders’ equity.

The financial statements have been prepared on a historicalcost basis, modified as required for measuring certain financialinstruments.

Format of the financial statementsFiat S.p.A. presents an Income Statement using a classificationbased on the nature of its revenues and expenses given thetype of business it performs. The Fiat Group presents aConsolidated Income Statement using a classification basedon function, as this is believed to be more representative ofthe format selected for managing the business sectors andfor internal reporting purposes and is coherent withinternational practice in the automotive sector.Fiat S.p.A. has elected to present current and non-currentassets and liabilities as separate classifications on the faceof the Balance Sheet. A mixed format has been selected bythe Fiat Group for the Consolidated Balance Sheet, aspermitted by IAS 1, presenting only current and non-currentassets separately. This decision has been taken in view of thefact that both companies carrying out industrial activities andthose carrying out financial activities are consolidated in the

Notes to the Financial Statements


Other non-current assets, Trade receivables, Current financialreceivables and Other current receivables, excluding assetsderiving from derivative financial instruments and all financialassets for which quotations on an active market are not availableand whose fair value cannot be reliably determined are measuredat amortised cost using the effective interest method if they havea pre-determined maturity. If financial assets do not have a pre-determined maturity they are measured at cost. Receivables witha due date beyond one year that are non-interest bearing or onwhich interest accrues at below market rate are discounted topresent value using market rates.

Valuations are performed on a regular basis with the purpose ofverifying if there is objective evidence that a financial asset, takenon its own or within a group of assets, may have been impaired.If objective evidence exists, the impairment loss is recognised asa cost in the Income Statement for the period.

Non-current financial payables, Other non-current liabilities,Trade payables, Current financial payables and Other payablesare measured on initial recognition at fair value (normallyrepresented by the cost of the transaction), including anytransaction costs.Financial liabilities are subsequently measured at amortised costusing the effective interest method, except for derivative financialinstruments and liabilities for financial guarantee contracts.Financial liabilities hedged by derivative instruments aremeasured according to the hedge accounting criteria applicable tofair value hedges; gains and losses resulting from subsequentmeasurement at fair value, caused by fluctuations in interestrates, are recognised in the Income Statement and are set off bythe effective portion of the gain or loss resulting from therespective valuation of the hedging instrument at fair value.

Liabilities for financial guarantee contracts are measured at thehigher of the estimate of the contingent liability (determined inaccordance with IAS 37 - Provisions, Contingent Liabilities andContingent Assets) and the amount initially recognised less anyamount released to income over time.

Derivative financial instrumentsDerivative financial instruments are used solely for hedgingpurposes, for the purpose of reducing foreign exchange raterisk, interest rate risk and the risk of fluctuations in marketprices.

In accordance with the conditions of IAS 39, derivativefinancial instruments qualify for hedge accounting only when,at the inception of the hedge, there is formal designationand documentation of the hedging relationship, the hedgeis expected to be highly effective, the effectiveness can bereliably measured and the hedge is actually highly effectivethroughout the financial reporting periods for which it wasdesignated.

All derivative financial instruments are measured at fair value,in accordance with IAS 39.

When financial instruments have the characteristics to qualifyfor hedge accounting the following accounting treatment isadopted:

n Fair value hedge – If a derivative financial instrumentis designated as a hedge of the exposure to changes in fairvalue of a recognised asset or liability that is attributableto a particular risk that could affect the Income Statement,the gain or loss resulting from remeasuring the hedginginstrument at fair value is recognised in the Income Statement.The gain or loss on the hedged item attributable to the hedgedrisk adjusts the carrying amount of the hedged item and isrecognised in the Income Statement.

n Cash flow hedge – If a derivative financial instrument isdesignated as a hedge of the exposure to variability in the futurecash flows of a recognised asset or liability or a highly probableforecast transaction that could affect the Income Statement, theeffective portion of the gain or loss on the derivative financialinstrument is recognised directly in equity. The cumulative gainor loss is reversed from equity and reclassified into the Income

When an impairment loss on assets subsequently reverses ordecreases, the carrying amount of the asset or cash-generatingunit is increased up to the revised estimate of its recoverableamount, but not in excess of the carrying amount that wouldhave been recognised had no impairment loss been recorded.The reversal of an impairment loss is recognised immediatelyin income.

Financial instruments

PresentationFinancial instruments held by the company are presented in theBalance Sheet as described in the following:

n Non-current assets: Investments, Other financial assets, Othernon-current assets.

n Current assets: Trade receivables, Current financial receivables,Other current receivables, Cash and cash equivalents.

n Non-current liabilities: Non-current financial payables,Other non-current liabilities.

n Current liabilities: Trade payables, Current financial payables(including payables for advances on the sale of receivables),Other payables.

The item “Cash and cash equivalents” consists of cash anddeposits with banks, units with liquidity funds and other highlytraded securities that are readily convertible to cash and whichare subject to an insignificant risk of changes in value.

The liability relating to financial guarantee contracts is includedin Non-current financial payables. The term financial guaranteecontracts refers to contracts under which the company guaranteesto make specific payments to reimburse the holder for a loss itincurs because a specified debtor fails to make payment whendue in accordance with the terms of a debt instrument. Thepresent value of the related receivable for any outstandingcommissions is classified in Non-current financial assets.

MeasurementInvestments in subsidiaries and associates are stated at costadjusted for any impairment losses.

The excess on acquisition of the purchase cost and the shareacquired by the company of the investee company’s net assetsmeasured at fair value is, accordingly, included in the carryingvalue of the investment.

Investments in subsidiaries and associates are tested forimpairment annually and if necessary more often. If thereis any evidence that these investments have been impaired,the impairment loss is recognised directly in the IncomeStatement. If the company’s share of losses of the investeeexceeds the carrying amount of the investment and if thecompany has an obligation to respond for these losses, thecompany’s interest is reduced to zero and a liability isrecognised for its share of the additional losses. If theimpairment loss subsequently no longer exists it is reversedand the reversal is recognised in the income statement upto the limit of the cost of the investment.

Investments in other companies, comprising non-currentfinancial assets that are not held for trading (available-for-sale financial assets), are initially measured at fair value. Anysubsequent profits and losses resulting from changes in fairvalue, arising from quoted prices, are recognised directly inequity until the investment is sold or is impaired; the totalprofits and losses recognised in equity up to that date arerecognised in the Income Statement for the period.Minor investments in other companies for which a marketquotation is not available are measured at cost, adjustedfor any impairment losses.

Other financial assets for which the company has the intentto hold to maturity are recognised on the trade date and aremeasured at purchase price (being representative of fair value)on initial recognition in the Balance Sheet, inclusive oftransaction costs other than in respect of assets held fortrading. These assets are subsequently measured at amortisedcost using the effective interest method.


Employee benefits

Post-employment plansThe company provides pension plans and other post-employment plans to its employees. The pension plans for whichthe company has an obligation under Italian law are definedcontribution plans, while the other post-employment plans, forwhich the company generally has an obligation under nationalcollective bargaining agreements, are defined benefit plans. Thepayments made by the company for defined contribution plansare recognised in the Income Statement as a cost when incurred.Defined benefit plans are based on the employees’ working livesand on the salary or wage received by the employee over a pre-determined period of service.

The employees’ severance indemnity (trattamento di finerapporto or TFR) is considered to be a defined benefit plan and isaccounted for in the same way as other defined benefit plans.

The company’s obligation to fund defined benefit plansand the annual cost recognised in the Income Statement aredetermined by independent actuaries using the projected unitcredit method. The portion of net actuarial gains and lossesat the end of the previous reporting period that exceeds thegreater of 10% of the present value of the defined benefitobligation and 10% of the fair value of the plan assets at thatdate is deferred and recognised over the remaining working livesof the employees (the “corridor method”); the portionof actuarial gains and losses that does not exceed this thresholdis deferred.

In the context of IFRS first-time adoption, the company elected torecognise all cumulative actuarial gains and losses at January 1,2004 (date of first-time adoption of IFRS by the Fiat Group),although it has adopted the corridor method for those arisingsubsequently.

The expense related to the reversal of discounting pensionobligations for defined benefit plans are reported separatelyas part of the Group’s financial expense.

The liability for obligations arising under defined benefit plansand due on termination of the employment contract representsthe present value of the obligation adjusted by actuarial gainsand loses deferred as the result of applying the corridor approachand by past service costs for employee service in prior periodsthat will be recognised in future years.

Other long-term benefitsThe accounting treatment of other long-term benefits is the sameas that for post-employment benefit plans except for the fact thatactuarial gains and losses and past service costs are fullyrecognised in the Income Statement in the year in which theyarise and the corridor method is not applied.

Equity compensation plansThe company provides additional benefits to certain membersof top management and to certain employees through equitycompensation plans. Under IFRS 2 - Share-based Payment, theseplans are a component of employee remuneration whose cost ismeasured by the fair value of the stock options at the grant daterecognised in the Income Statement on a straight-line basis fromthe grant date to the vesting date, with a counter entry to equity.Changes in fair value after the grant date do not have any effecton the initial measurement.

The company has applied the transitional provisions of IFRS 2and as a result the Standard is applicable to all stock option plansgranted after November 7, 2002 but which had not yet vested byJanuary 1, 2005, the effective date of the Standard. Detaileddisclosures are also provided for plans granted before that date.

Statement in the period in which the hedged transaction isrecognised. Gains or losses associated with a hedge (or part ofa hedge) which is no longer effective are immediately recognisedin the Income Statement. If a hedging instrument or a hedgingrelationship is terminated, but the transaction being hedged hasnot yet occurred, the cumulative gains and losses recognised inequity until that time are recognised in the Income Statement atthe time the transaction occurs. If a hedged transaction is nolonger considered probable, the unrealised gains and losses thatremain in equity are immediately recognised in the IncomeStatement.

If hedge accounting cannot be used, the gains and lossesresulting from changes in the measurement of the derivativefinancial instrument at fair value are immediately recognisedin the Income Statement.

InventoryInventory consists of work in progress on specific contracts and inparticular relates to long-term construction contracts signed byFiat S.p.A. with Treno Alta Velocità – T.A.V. S.p.A. under whichFiat S.p.A. as general contractor performs the coordination,organisation and management of the work.

Work in progress refers to activities carried out directly andis measured by applying the percentage of completion to thecontract fee, thereby recognising the margins deriving from thework performed to date. The cost to cost method is usedto determine the percentage of completion of a contract (by

dividing the costs incurred by the total costs forecast for thewhole construction).Any losses expected to be incurred on contracts are fullyrecognised in the Income Statement and as a reductionin contract work in progress when they become known.

Any advances received from customers for services performedare presented as a reduction in inventory. If the amount ofadvances exceeds inventory, the excess is recognised asAdvances in the item Other payables.

Sales of receivablesReceivables sold in factoring operations are derecognisedfrom assets if and only if the risks and rewards relating totheir ownership have been substantially transferred to thebuyer. Receivables sold with recourse and without recoursethat do not satisfy this condition remain in the company’sBalance Sheet even if they have been sold from a legal pointof view; in this case, an obligation of the same amount isrecognised as a liability for the advances received.

Assets held for saleAny amounts in this item will consist of non-current assets(or assets and liabilities included in disposal groups) whosecarrying amount will be recovered principally through a saletransaction rather than through continuing use. Assets heldfor sale (or disposal groups) are measured at the lower oftheir carrying amount and fair value less disposal costs.


Use of estimatesThe preparation of financial statements and related disclosuresthat conform to IFRS requires management to make estimatesand assumptions that affect the reported amounts of assetsand liabilities and the disclosure of contingent assets andliabilities at the date of the financial statements. Actual resultscould differ from those estimates. Estimates are used inaccounting for depreciation and amortisation, impairmentlosses and reversals of impairment losses on investments, themargins earned on construction contracts, employee benefits,taxes and provisions. Estimates and assumptions are reviewedperiodically and the effects of any changes are recognised inthe period in which the estimate is revised if the revisionaffects only that period, or in the period of the revision andfuture periods if the revision affects both current and futureperiods.

New accounting principlesIn August 2005, the IASB issued IFRS 7 – Financial Instruments:Disclosures and a complementary amendment to IAS 1Presentation of Financial Statements – Capital Disclosures.IFRS 7 requires disclosures about the significance of financialinstruments for an entity’s financial position and performance.These disclosures incorporate many of the requirementspreviously included in IAS 32 – Financial Instruments:Disclosure and Presentation. IFRS 7 also requires informationabout the extent to which the entity is exposed to risks arisingfrom financial instruments, and a description of management’sobjectives, policies and processes for managing those risks.The amendment to IAS 1 introduces requirements fordisclosures about an entity’s capital. IFRS 7 and the amendment to IAS 1 are effective for annualperiods beginning on or after January 1, 2007. The Companyearly adopted IFRS 7 for the annual period beginning January1, 2006. Comparative data for the Notes envisaged inparagraphs 31 and 42 of said standard are not provided, inaccordance with the transitional provisions of paragraph 44.

On November 2, 2006, the IFRIC issued an interpretation ofIFRS 2 (IFRIC Interpretation 11 – IFRS 2 – Group and TreasuryShare Transactions). This interpretation establishes that share-based payment arrangements in which an entity receivesservices as consideration for its own equity instruments mustbe accounted for as equity-settled. IFRIC Interpretation 11 iseffective from January 1, 2008. The Company early adoptedthis interpretation on January 1, 2006 and no significant effectsarose from this.

Risk managementThe risks to which Fiat S.p.A. is exposed, either directly orindirectly through its subsidiaries, are the same as those of thecompanies of which it is the Parent. Reference should thereforebe made to the note on Risk Management included as part ofthe Notes to the Consolidated Financial Statements of the FiatGroup as well as to Note 29.

ProvisionsThe company recognises provisions when it has a legal orconstructive obligation to third parties, when it is probablethat the settlement of the obligation will require the outflowof resources and when a reliable estimate can be made forthe amount of the obligation.

Changes in estimates are recognised in the Income Statementfor the period in which the change occurs.

Treasury stockThe cost of purchase of treasury stock is accounted for as areduction of equity. The effects of any subsequent transactionswith those shares are similarly recognised directly in equity.

Dividends received and receivableDividends received and receivable from investments arerecognised in the Income Statement when the right to receivethe payment of this income is established and only if declaredfrom post-acquisition net income.

If dividends are declared from pre-acquisition net income,those dividends are deducted from the cost of the investment.

Revenue recognitionRevenue is recognised to the extent that it is probable thateconomic benefits will flow to the company and when theamount of revenue can be measured reliably. Revenue ispresented net of any adjusting items.

Revenue from services and revenue from constructioncontracts is recognised by reference to the stage of completion(the percentage of completion method). Revenues arising fromroyalties are recognised on an accrual basis in accordance withthe terms of the relevant agreement.

Financial income and expensesFinancial income and expenses are recognised and measuredin the Income Statement on an accrual basis.

TaxesThe tax charge for the period is determined on the basis ofprevailing laws and regulations. Income taxes are recognisedin the Income Statement other than those relating to itemscredited or charged directly to equity, in which case incometaxes are also recognised directly in equity.

Deferred tax assets and liabilities are determined on the basisof all the temporary differences between the carrying amountof an asset or liability in the Balance Sheet and itscorresponding tax basis. Deferred tax assets resulting fromunused tax losses and temporary differences are recognisedto the extent that it is probable that future taxable profit willbe available against which they can be utilised. Current anddeferred income taxes and liabilities are offset when there isa legally enforceable right to offset. Deferred tax assets andliabilities are measured by using the tax rates that areexpected to apply to the period when the asset is realisedor the liability is settled.

Fiat S.p.A. and almost all its Italian subsidiaries have elected totake part in the national tax consolidation programme pursuantto articles 117/129 of the Consolidated Income Tax Act(T.U.I.R.); the election has been made for a three year periodbeginning in 2004.

Fiat S.p.A. acts as the consolidating company in this programmeand calculates a single taxable base for the group of companiestaking part, thereby enabling benefits to be realised fromoffsetting taxable income and tax losses in a single tax return.Each company participating in the consolidation transfers itstaxable income or tax loss to the consolidating company andFiat S.p.A. recognises a receivable from that company for theamount of IRES corporate income tax paid over on its behalf. Inthe case of a company bringing a tax loss into the consolidationFiat S.p.A. recognises a payable to that company for the amountof the loss actually set off at a group level.

Dividends Dividends payable are recognised as a change in stockholders’equity in the period in which their distribution is approved bystockholders.


In particular as the investments are not listed and a market value (fair value less costs to sell) cannot be reliably measured, theirrecoverable amount in measuring impairment losses and the reversal of impairment losses has been taken as their value in use.The value in use of an investment is determined by estimating the present value of the estimated cash flows expected to arisefrom the results of the investment and from the estimated value of a hypothetical ultimate disposal, in line with the requirementsof paragraph 33 of IAS 28. In calculating this value in use, the forecast included in the business plans of the individual GroupSectors are taken into consideration, as attributed to the investments, increased by their terminal value, adjusted to take accountof the risks and uncertainties inherent in the assumptions on which these plans are based. These results and the terminal valueare then discounted to present value by applying a rate that is representative of the cost of equity, which varies between 11%and 16% depending on the characteristics of the Sector under consideration.

The investment in Fiat Partecipazioni S.p.A. was impaired in previous years by a total of 5,403,000 thousand euros, which reflectsfor the most part losses incurred in the Fiat Auto Sector, held as an investment by Fiat Partecipazioni S.p.A. through thesubholding Fiat Auto Holdings B.V. As a result of the fact that the Fiat Auto Sector has returned to profitability in 2006 and due topositive future forecasts, the value in use of the investment in that company has been estimated to be approximately 3.3 billioneuros, taking into consideration the above-mentioned adjustments, which was then compared with its carrying amount in FiatPartecipazioni S.p.A. of approximately 2.1 billion euros. The difference of approximately 1.2 billion euros, taken together with thecash flows generated at Fiat Partecipazioni S.p.A. (earned moreover from the gains realised on the sale of investments consideredby the Group to be non-strategic), has given rise to a reversal of 1,388,000 thousand euros of the previous impairment loss. Theresidual part of the accumulated impairment loss recognised in prior years which is available for reversal in future years amountsto 4,015,000 thousand euros, as reported in Note 13.

The investment in 60.56% of the capital of Iveco S.p.A. (the remaining 39.44% is held by Fiat Partecipazioni S.p.A.) was transferredto Fiat S.p.A. during the year from Fiat Netherlands Holding N.V. under a regime whereby the carrying amounts were leftunchanged throughout the operation, as described further in Note 13. On the basis of grounds similar to those used for Fiat AutoS.p.A., impairment losses of 945,814 thousand euros recognised in prior years and implicitly reflected in the book value transferredwere reversed. The value in use of the investment held is actually greater than the carrying value that has been reinstated, andamounting to 1,593,290 thousand euros.

In a similar manner the part of the write-down of the investment in Fiat Netherlands Holding N.V. attributable to its holdingin CNH Global N.V. and amounting to 95,536 thousand euros has been fully reversed.

The write-down of the investment in Comau S.p.A., carried out using the same approach, was affected by the losses incurredby the Sector in 2006 as the result of the steps taken to restructure the company and reshape its operations.

3. Gains (losses) on the disposal of investmentsNet gains amount to 425 thousand euros in 2006, representing an improvement of 1,725 thousand euros compared to 2005.

The 2006 figure mainly includes the gains on the sale of minor investments within the Group.

Net losses of 1,300 thousand euros were realised from the disposal of investments in 2005, arising from price settlementson the sale of minor investments.

Composition and principal changes

Income Statement

1. Dividends and other income from investmentsDividends and other income from investments can be analysed as follows:


Dividends distributed by subsidiaries:- IHF - Internazionale Holding Fiat S.A. 258,967 –- Fiat Finance S.p.A. 75,000 –- Itedi S.p.A. 12,000 –Total dividends distributed by subsidiaries 345,967 –Dividends distributed by other companies 16,452 7,714Total Dividends and other income from investments 362,419 7,714

Dividends distributed by other companies in 2006 consist of dividends paid by Mediobanca S.p.A. (8,702 thousand euros),Consortium S.r.l. (6,618 thousand euros) and Fin. Priv. S.r.l. (1,132 thousand euros).

2. (Impairment losses) reversals of impairment losses of investmentsImpairment losses and reversals of impairment losses of investments can be analysed as follows:


Reversals of impairment losses:- Fiat Partecipazioni S.p.A. 1,388,000 –- Iveco S.p.A. 945,814 –- Fiat Netherlands Holding N.V. 95,536 376,100- Magneti Marelli Holding S.p.A. – 144,221- Fiat USA Inc. – 4,017- Fiat Finance North America Inc. – 2,415Total Reversals of impairment losses 2,429,350 526,753Impairment losses:- Business Solutions S.p.A. – (52,056)- Teksid S.p.A. – (52,986)- Comau S.p.A. (330,000) (41,800)- Fiat Partecipazioni S.p.A. – (810,700)Total Impairment losses (330,000) (957,542)Total (Impairment losses) reversals of impairment losses 2,099,350 (430,789)

This item consists of the impairment losses or reversals of impairment losses arising from the application of the cost methodin accordance with IAS 27 and IAS 36.


As described in Note 4, certain of the company’s managers performed their duties at the premises of Group’s principal subsidiarieswith their costs then being recharged to those companies.

Defined contribution plans consist of the amounts paid by the company to the Italian insurance bodies (INPS) and other socialsecurity and assistance organisations for post-employment benefit defined contribution plans (pension plans and medical care)on behalf of all categories of employee. Social security contributions consist of the amount paid by the company to the Italianinsurance and assistance bodies (INPS and INAIL) for short-term benefits on behalf of employees such as sickness benefits,industrial injury benefits and compulsory maternity leave.

The compensation component of stock option plans refers to stock option plans with underlying Fiat S.p.A. shares, as describedin detail in Note 20.

Restructuring costs consist of employee leaving incentives paid.

Other personnel costs consist mainly of accruals for employee annual target bonuses, leaving incentives and insurance.

The aggregate expense incurred in 2006 and accrued at year end for the compensation of key management personnel of theGroup amounts to approximately 19,774 thousand euros. This amount is inclusive of the following:

n the provision charged by the company in respect of mandatory severance indemnity, amounting to 945 thousand euros(including the amount recognised in financial expenses);

n the amount contributed by the company to a defined contribution pension fund amounting to 536 thousand euros in 2006;

n the amount contributed by the company to a special defined benefit plan for certain senior executives amounting to 711thousand euros in 2006.

6. Other operating costsOther operating costs can be analysed as follows:


Costs for services rendered by Group companies 41,345 32,669Costs for services rendered by third parties 56,352 53,483Costs for the use of third party assets 1,561 988Purchase of goods 488 407Depreciation of property, plant and equipment 2,761 2,816Amortisation of intangible assets 121 95Sundry operating costs 38,378 30,902Total Other operating costs 141,006 121,360

4. Other operating incomeOther operating income can be analysed as follows:


Revenues from services rendered to Group companies 29,513 20,170Changes in construction contract work in progress 44,376 40,977Other revenues and income from Group companies 3,687 4,086Other revenues and income from third parties 1,662 7,621Total Other operating income 79,238 72,854

Revenues from services rendered to Group companies refer to managerial services provided by Fiat S.p.A. personnel at thepremises of various Group companies and fee income for the use of the Fiat trademark for licences granted to Fiat Auto S.p.A.and Fiat Automoveis S.A. – FIASA.

Changes in construction contract work in progress relate to the portion attributable to the year of the fees due to Fiat S.p.A. forthe activities performed directly by the company (management, coordination and organisation) as part of the agreements signedwith Treno Alta Velocità - T.A.V. S.p.A. (see Note 27).

Other revenues and income from Group companies mostly relates to rental income from real estate properties and to directors’fees paid by companies for duties performed by Fiat S.p.A. employees.

Other revenues and income from third parties refers to the recovery of expenses, prior year income and sundry income.

5. Personnel costsPersonnel costs can be analysed as follows:


Wages and salaries 22,589 22,993Defined contribution plans and social security contributions 8,094 7,315Employee severance indemnity and other defined benefit plans 1,821 2,847Other long-term employee benefits 314 44Compensation component of stock option plans 11,297 10,041Restructuring costs 4,255 10,940Other personnel costs 9,530 5,847Total Personnel costs 57,900 60,027

The average number of employees for the year rose from 133 in 2005 (63 managers, 65 white-collar workers and 5 blue-collarworkers) to 140 in 2006 (63 managers, 70 white-collar workers and 7 blue-collar workers).


8. Financial income (expenses)Financial income (expenses) can be analysed as follows:


Financial income 55,282 105,787Financial (expenses) (145,945) (182,304)Net income (expenses) from derivative financial instruments 65,816 14,832Total Financial income (expenses) (24,847) (61,685)

Financial income can be analysed as follows:


Financial income from Group companies:- Interest income from Fiat Finance S.p.A. current account 13,258 40,387- Interest income from Fiat Finance S.p.A. loans 28,209 48,868- Commission income from sureties and personal guarantees 3,631 4,397- Other financial income 979 717Total Financial income from Group companies 46,077 94,369Financial income from third parties:- Interest income on bank and other deposits 90 102- Interest income on tax credits 8,506 9,464- Commission income from third party sureties and guarantees 604 1,836- Other third party financial income 5 16Total Financial income from third parties 9,205 11,418Total Financial income 55,282 105,787

Financial expenses can be analysed as follows:


Financial expenses with Group companies:- Interest expense from Fiat Finance S.p.A. current account 3,032 –- Interest expense from Fiat Finance S.p.A. loans 122,487 –- Commissions and other charges payable to Intermap (Nederland) B.V. 3,992 2,937- Fiat Finance S.p.A. service commissions 147 5Total Financial expenses with Group companies 129,658 2,942Financial expenses with third parties:- Interest expense on the Mandatory Convertible Facility – 97,288- Commissions on the Mandatory Convertible Facility – 68,945- Interest expense and charges for the sale of receivables 14,286 11,695- Financial expenses for employee benefits 732 655- Other third party interest and financial expenses 1,286 721Total Financial expenses with third parties 16,304 179,304Exchange losses (income) (17) 58Total Financial expenses 145,945 182,304

Costs for services rendered by Group companies consist of assistance and consultancy of an administrative and financial nature(Fiat Gesco S.p.A. 3,948 thousand euros, Fiat Finance S.p.A. 630 thousand euros, Servizio Titoli S.p.A. 1,228 thousand euros, KeyGConsulting S.p.A. 511 thousand euros), public relations (Fiat I.&C.S. S.c.p.A. 3,001 thousand euros), facility management (IngestFacility S.p.A. 3,709 thousand euros), payroll services (Fiat Sepin S.c.p.A. 3,005 thousand euros), information systems services(eSPIN S.p.A. 1,932 thousand euros), security services (Orione S.c.p.A. 3,478 thousand euros, Sirio S.c.p.A. 1,132 thousand euros),sponsorship, advertising and promotion services (Ferrari S.p.A. 2,066 thousand euros, Fiat France S.A. 1,734 thousand euros) andinternal auditing services (Fiat-Revisione Interna S.c.r.l. 13,704 thousand euros).

Costs for services rendered by third parties consist of professional advice and consultancy in the technical field (the high speedtrain TAV) and the legal, administrative and financial fields for a total of 26,599 thousand euros, sponsorship and advertisingservices for 3,217 thousand euros, information systems services for 2,209 thousand euros and insurance costs and generalexpenses.

Costs for services also include the fees paid to the directors and statutory auditors of Fiat S.p.A. amounting to 8,991 thousandeuros and 147 thousand euros respectively. The amount of directors’ fees include those resolved by stockholders as well ascompensation established by the Board of Directors for directors having particular duties.

Sundry operating costs consist of costs attributed to Group companies for their initiatives in supporting the Group’s brand andimage, accruals for provisions, subscriptions to trade associations, prior year expenses and other more minor costs.In 2005 sundry operating costs included the costs for an indemnity paid on the termination of the agreements with IBM and highercosts attributed to Group companies for their initiatives in supporting the Group’s brand and image.

7. Income (expenses) from significant non-recurring transactionsThere is no non-recurring income or expense in 2006.

The net income from significant non-recurring transactions of 1,133,110 thousand euros in 2005 consisted of the amountof 1,135,000 thousand euros received on the termination of the Master Agreement with General Motors, net of the relatedtransaction costs (legal expenses and other costs for a total of 1,890 thousand euros).


IRAP deferred tax expense of 3,438 thousand euros relates to the part of the margins earned on the long-term agreements withT.A.V. S.p.A. whose taxation is deferred to the completion of the work, net of deferred deductible costs relating to the same tax.

Tax income relating to prior periods of 173 thousand euros relates to refunds of foreign income taxes and the finalisation of lastyear’s national consolidated tax return.

Income taxes in the prior year consist almost exclusively of deferred tax expense of 277,000 thousand euros resulting from therealisation of deferred tax assets recognised in the Balance Sheet at December 31, 2004 in relation to the income arising fromthe termination of the Master Agreement with General Motors.

A reconciliation between theoretical income taxes determined on the basis of the tax rates applicable in Italy and the income taxesreported in the financial statements is as follows:


Theoretical income taxes 764,834 460,730Tax effect of permanent differences (703,920) (138,560)Taxes relating to prior years (173) 713Unrecognised net deferred tax assets (91,501) (47,241)Other differences – 3,186Current and deferred income tax recognised in the financial statements, excluding IRAP (30,760) 278,828IRAP (current and deferred) 5,065 –Income taxes reported in the Income Statement (current and deferred income taxes) (25,695) 278,828

Theoretical income taxes are calculated by applying the IRES tax rate (33% in 2006 and 2005) to the result before taxes. IRAP taxis excluded to facilitate an understanding of the reconciliation between theoretical and reported income taxes; since it is calculatedon a tax basis that differs from profit before taxes, it would otherwise generate distortions between one year and another.

The permanent differences referred to above include amongst other things the tax effect of non-taxable income in 2006 amountingto 837,061 thousand euros (459,423 thousand euros in 2005) and of non-deductible costs in 2006 amounting to 133,141 thousandeuros (320,863 thousand euros in 2005). In particular, non-taxable income in 2006 results principally from the reversal ofimpairment losses on investments which led to an effect of 801,685 thousand euros (173,828 thousand euros in 2005). Thetheoretical tax on this income in 2005 included also 283,020 thousand euros relating to the non-recurring financial incomeof 857,636 thousand euros arising from the Mandatory Convertible Facility.

Non-deductible costs mainly include impairment losses on investments whose tax effect totalled 117,902 thousand euros in 2006(315,989 thousand euros in 2005).

Net income from derivative financial instruments of 65,816 thousand euros (14,832 thousand euros in 2005) consists of thecomponent of profit and loss resulting from the valuation of derivative financial instruments arranged through other Groupcompanies which, in their turn, are parties to agreements with primary banks. In particular, the 2006 amount includes gainsof 71,198 thousand euros (14,832 thousand euros in 2005) arising from the change in fair value of two equity swaps, expiringin 2007, stipulated to hedge the risk of an increase in the Fiat share price above the exercise price of stock options granted in2004 and 2006 to the Chief Executive Officer (see Note 20). The equity swaps have a notional amount of 219,853 thousand euros(70,241 thousand euros at December 31, 2005). Although theses equity swaps were entered into for hedging purposes, they donot qualify for hedge accounting under IFRS and accordingly are defined as trading derivative financial instruments.

9. Financial income from significant non-recurring transactionsThere is no financial income from significant non-recurring transactions in 2006.

In 2005 this item consisted of income of 857,636 thousand euros arising from the increase of capital stock on September 20, 2005and the simultaneous extinguishment of the Mandatory Convertible Facility. In particular, this income represents the differencebetween the subscription price of the shares (10.28 euros per share) and their stock market price at the subscription date (7.337euros per share) related to the new shares issued (291,828,718 ordinary shares), net of the related costs.

10. Income taxesIncome taxes recognised in the Income Statement can be analysed as follows:


Current taxes:- IRES (30,587) 1,115- IRAP 1,627 –Total Current taxes (28,960) 1,115Deferred taxes for the period:- IRES – 277,000- IRAP 3,438 –Total deferred taxes for the period 3,438 277,000Taxes relating to prior periods (173) 713Total Income taxes (25,695) 278,828

IRES current tax income of 30,587 thousand euros arises from the compensation for the tax losses brought by the company intothe national tax consolidation for the year.

IRAP current tax expense of 1,627 thousand euros results from the taxable income for the year arising mostly from the marginsearned on the long-term agreements with T.A.V. S.p.A. for the completion of the work for the high speed stretch of line betweenTurin and Novara.


Balance Sheet

11. Intangible assetsAll intangible assets were acquired from third parties. There are no intangible assets with an indefinite useful life.

The main classes of intangible assets and related changes during 2006 are summarised below:

At (Decreases) and At(in thousands of euros) December 31, 2005 Additions Amortisation Other changes December 31, 2006

Concessions, licences and similar rights- Gross carrying amount 1,003 26 – 28 1,057- Accumulated amortisation (912) – (74) 16 (970)- Net carrying amount 91 26 (74) 44 87

Other intangible assets- Gross carrying amount 373 138 – – 511- Accumulated amortisation (9) – (47) – (56)- Net carrying amount 364 138 (47) – 455

Intangible assets in progress and advances- Gross carrying amount 221 57 – (48) 230- Accumulated amortisation – – – – –- Net carrying amount 221 57 – (48) 230

Total intangible assets- Gross carrying amount 1,597 221 – (20) 1,798- Accumulated amortisation (921) – (121) 16 (1,026)- Net carrying amount 676 221 (121) (4) 772

Concessions, licences and similar rights include the costs incurred for the development and registration of owned trademarkswhich are amortised on a straight-line basis over three years.

Other intangible assets relate to leasehold improvements. They are amortised over the term of the related leases (4 and 12 years).

Intangible assets in progress and advances relate to costs for administrative registration procedures of trademarks that had notbeen finalised at year end, which are therefore not amortised.

Amortisation of intangible assets is recognised under Other operating costs in the Income Statement (Note 6).

Details of deferred tax liabilities net of deferred tax assets may be analysed as follows:

RecognisedAt in Income At

(in thousands of euros) December 31, 2005 Statement Charged to equity December 31, 2006

Deferred tax assets arising from:- Write-downs of investments that are deductible in future years 391,907 (241,037) – 150,870- Taxed provisions and other minor differences 36,036 (21,851) – 14,185Total Deferred tax assets 427,943 (262,888) – 165,055Deferred tax liabilities arising from:- Deferred tax on gains (39,736) 39,736 – –- Measurement of construction contracts by the percentage of completion method (75,865) 38,220 – (37,645)- Other (8,910) 421 (1,505) (9,994)Total Deferred tax liabilities (124,511) 78,377 (1,505) (47,639)Theoretical tax benefit arising from tax loss carryforward 143,089 89,778 – 232,867Adjustments for assets whose recoverability is not probable (446,521) 91,295 1,505 (353,721)Total Deferred tax liabilities, net of Deferred tax assets – (3,438) – (3,438)

Deferred tax assets have been recognised by carrying out a critical analysis to ensure that the conditions for their future realisationexist, through the use of updated strategic business plans and the related tax plans. As a consequence, the total theoretical futuretax benefits arising from deductible temporary differences (165,055 thousand euros at December 31, 2006 and 427,943 thousandeuros at December 31, 2005) and tax loss carryforward (232,867 thousand euros at December 31, 2006 and 143,089 thousand eurosat December 31, 2005), has been reduced by 353,721 thousand euros at December 31, 2006 (446,521 thousand euros at December31, 2005).

Total temporary differences (deductible and taxable) and total tax losses at December 31, 2006 and the amounts for which Deferredtax assets have not been recognised, analysed by year of expiry, are set out in the following table:

Year of expiry

Total at(in thousands of euros) December 31, 2006 2007 2008 2009 2010 Beyond 2010

Temporary differences and tax losses relating to IRES:- Deductible temporary differences 497,567 490,321 1,164 1,146 687 4,249- Taxable temporary differences (131,344) – – (101,060) – (30,284)- Tax losses 705,655 – 178,678 230,529 – 296,448- Temporary differences and tax losses for which

deferred tax assets have not been recognised (1,071,878) (490,321) (179,842) (130,615) (687) (270,413)Temporary differences and tax losses relating to State taxation – – – – – –Temporary differences relating to IRAP:- Deductible temporary differences 20,177 12,801 1,162 1,087 878 4,249- Taxable temporary differences (101,071) (11) – (101,060) – –Temporary differences and tax losses relating to local taxation (80,894) 12,790 1,162 (99,973) 878 4,249


Investments in subsidiaries and changes that occurred during the year are set out in the following table:

At Acquisitions/ Disposals/ Capital (Imp. losses)/ At(in thousands of euros) % interest December 31,2005 Capital increases reimbursements rev. of imp. losses December 31, 2006

Fiat Partecipazioni S.p.A. 100.00 580,792 6,000,000 1,388,000 7,968,792- Gross carrying amount 5,983,792 6,000,000 11,983,792- Accumulated impairment losses (5,403,000) 1,388,000 (4,015,000)Fiat Netherlands Holding N.V. 60.56 2,725,683 121,126 (647,476) 95,536 2,294,869- Gross carrying amount 3,767,033 121,126 (1,593,290) 2,294,869- Accumulated impairment losses (1,041,350) 945,814 95,536 –Iveco S.p.A. 60.56 647,476 945,814 1,593,290- Gross carrying amount 1,593,290 1,593,290- Accumulated impairment losses (945,814) 945,814 –Ferrari S.p.A. 85.00 160,675 896,012 (1,484) 1,055,203- Gross carrying amount 160,675 896,012 (1,484) 1,055,203- Accumulated impairment losses – –Magneti Marelli Holding S.p.A. 99.99 811,153 811,153- Gross carrying amount 811,153 811,153- Accumulated impairment losses – –Teksid S.p.A. 84.79 75,851 75,851- Gross carrying amount 128,837 128,837- Accumulated impairment losses (52,986) (52,986)Comau S.p.A. 100.00 140,613 240,000 (330,000) 50,613- Gross carrying amount 182,413 240,000 422,413- Accumulated impairment losses (41,800) (330,000) (371,800)Business Solutions S.p.A. 100.00 36,304 36,304- Gross carrying amount 88,360 88,360- Accumulated impairment losses (52,056) (52,056)Itedi - Italiana Edizioni S.p.A. 100.00 25,899 25,899- Gross carrying amount 25,899 25,899- Accumulated impairment losses – –IHF - Internazionale Holding Fiat S.A. 100.00 33,445 33,445- Gross carrying amount 33,445 33,445- Accumulated impairment losses – –Fiat Finance S.p.A. 100.00 222,263 222,263- Gross carrying amount 222,263 222,263- Accumulated impairment losses – –Fiat Finance North America Inc. 39.47 15,557 15,557- Gross carrying amount 17,118 17,118- Accumulated impairment losses (1,561) (1,561)Fiat U.S.A. Inc. 100.00 27,258 27,258- Gross carrying amount 34,645 34,645- Accumulated impairment losses (7,387) (7,387)Other minor 1,047 144 (450) 741- Gross carrying amount 1,935 144 (1,216) 863- Accumulated impairment losses (888) 766 (122)Total investments in subsidiaries 4,856,540 7,904,758 (649,410) 2,099,350 14,211,238 - Gross carrying amount 11,457,568 8,850,572 (1,595,990) – 18,712,150- Accumulated impairment losses (6,601,028) (945,814) 946,580 2,099,350 (4,500,912)

12. Property, plant and equipmentThe main classes of property, plant and equipment and related changes during 2006 are summarised below:

At (Decreases) and At(in thousands of euros) December 31, 2005 Additions Amortisation Other changes December 31, 2006

Land and buildings- Gross carrying amount 45,946 – – – 45,946- Accumulated depreciation (11,516) – (1,304) – (12,820)- Net carrying amount 34,430 – (1,304) – 33,126

Plant and machinery- Gross carrying amount 10,086 30 – – 10,116- Accumulated depreciation (8,161) – (989) – (9,150)- Net carrying amount 1,925 30 (989) – 966

Other tangible assets- Gross carrying amount 5,630 483 – (61) 6,052- Accumulated depreciation (2,327) – (468) (96) (2,891)- Net carrying amount 3,303 483 (468) (157) 3,161

Total property, plant and equipment- Gross carrying amount 61,662 513 – (61) 62,114- Accumulated depreciation (22,004) – (2,761) (96) (24,861)- Net carrying amount 39,658 513 (2,761) (157) 37,253

Land and buildings include land for 610 thousand euros (unchanged with respect to the previous year) while buildings mainlycomprise the company’s headquarters in Turin, Via Nizza 250.

Plant and machinery is principally made up of general plant used in the buildings.

Other tangible assets comprise cars, office furniture and equipment.

At December 31, 2006, there are no tangible assets in progress or contractual commitments to purchase items of property, plantand equipment of a significant amount.

There are no buildings charged as collateral or whose use is restricted.

Depreciation of property, plant and equipment is recognised under Other operating costs in the Income Statement (Note 6).

13. InvestmentsAt December 31, 2006, investments total 14,499,595 thousand euros and underwent the following changes during the year:

(Impairment losses)Disposals/ reversal of imp.

At Acquisitions/ Capital losses/ adjustments At(in thousands of euros) December 31, 2005 Capital increases reimbursements to fair value December 31, 2006

Investments in subsidiaries 4,856,540 7,904,758 (649,410) 2,099,350 14,211,238Investments in other companies 260,992 18,111 (19,243) 28,497 288,357Total Investments 5,117,532 7,922,869 (668,653) 2,127,847 14,499,595


The increase in the investments in Mediobanca S.p.A. and Assicurazioni Generali S.p.A. shown in the column Acquisitions/Capitalincreases is the result of the winding up of Consortium S.r.l. and the consequent transfer to its shareholders of the shares that thecompany held in Mediobanca S.p.A. and Assicurazioni Generali S.p.A. on the basis of their investments. The transfer prices weredetermined on the basis of the market price of the shares.

Fiat S.p.A has measured its investments in Mediobanca S.p.A. and Assicurazioni Generali S.p.A. on the basis of the market priceof the shares at year end. This led to an increase in the carrying amount of the investments, recognised directly in equity at year end.

There are no entities in Investments in other companies for whose obligations Fiat S.p.A. has unlimited responsibility (article 2361,paragraph 2 of the Italian civil code).

At December 31, 2005 and 2006 there were no investments given as security for financial or contingent liabilities.

14. Other financial assetsOther financial assets may be analysed as follows:

At At(in thousands of euros) December 31, 2006 December 31, 2005 Change

Call option on Ferrari S.p.A. shares 10,032 – 10,032Fees receivables for guarantees given 10,029 5,262 4,767Debt securities 73 73 –Total Other financial assets 20,134 5,335 14,799

The call option on Ferrari S.p.A. shares has been measured at the amount of the premium paid in October 2006 and relates to 5%of the capital stock of Ferrari S.p.A. held by the Arab Mubadala Development Company PJSC fund. The option may be exercisedat a price of 303 euros per share from January 1, 2008 to July 31, 2008. It has been recognised at cost since its fair value cannotbe reliably measured.

Fees receivables for guarantees given are measured at the present value of the fees to be received in future years for guaranteesprovided by the company (mainly for guaranteeing loans obtained by Group companies).

Debt securities consist of listed Italian State securities pledged to fund scholarship grants.

A breakdown of other financial assets by maturity date is as follows:

At At(in thousands of euros) December 31, 2006 December 31, 2005

Other financial assetsdue within one year 2,512 1,331

due after one year but within five years 17,578 3,044due after five years 44 960

total 20,134 5,335

Changes that occurred in 2006 may be summarised as follows:

n In May 2006, in order to re-balance the equity structure inside the Group, the capital stock of the subsidiaries Fiat PartecipazioniS.p.A and Fiat Netherlands Holding N.V. was increased by 6,000,000 thousand euros and 121,126 thousand euros respectively.

n In May 2006, Ferrari S.p.A. increased its capital stock through the issuance of 104,000 new shares servicing its stock option plans.Fiat S.p.A. subsequently acquired 93,600 newly-issued shares of Ferrari S.p.A. for 26,713 thousand euros and sold 5,200 shares for1,484 thousand euros, the latter as part of its agreements with Mubadala Development Company PJSC, bringing its interest thereinto 56.4%.

n At the end of September 2006, Fiat S.p.A. exercised its call option and repurchased 28.6% of the capital stock of Ferrari S.p.A. fromMediobanca S.p.A. (and the other members of the syndicate), increasing its interest therein from 56.4% to 85%. The call option waspart of the agreements signed with Mediobanca S.p.A. in connection with the sale in 2002 aimed at listing the Ferrari S.p.A. shares.The above transaction led to an increase in the carrying amount of the investment equal to the purchase price of 892,555 thousandeuros, including related charges, net of the release of the provision of 23,256 thousand euros accrued in previous years against thecompany’s obligation to Mediobanca S.p.A. which was subject to the latter’s execution of the listing of Ferrari S.p.A. shares (seeNote 24). The remaining rights agreed with Mediobanca S.p.A. have now ceased. Fiat has a call option exercisable from January 1,2008 to July 31, 2008 on a further 5% of the Ferrari shares held by Mubadala Development Company at a pre-determined price of303 euros per share (for a total of 122,776 thousand euros) less any dividend that may be distributed.

n In December 2006, Fiat Netherlands Holding N.V. decreased its capital stock and transferred its 100% investment in Iveco S.p.A.to its stockholders (Fiat S.p.A. and Fiat Partecipazioni S.p.A.) on the basis of their ownership percentage. Fiat S.p.A. thus obtained519,871,290 Iveco S.p.A. shares, equal to 60.56% of the capital stock, at the same value as the previous carrying amount in thefinancial statements of Fiat Netherlands Holding N.V. (approximately 1.245 euros per share). At the same time it decreased itsinvestment in Fiat Netherlands Holding N.V. by the same amount (647,476 thousand euros). Since the transaction involved directlyand indirectly wholly owned subsidiaries of Fiat S.p.A., carrying amounts were left unchanged throughout the operation. As aresult, the accumulated impairment losses recognised by Fiat S.p.A. in previous years due to the impairment losses related toIveco S.p.A. have not been adjusted.

Impairment losses and the reversals of impairment losses arise from the application of the cost method (see Note 2).

A full list of investments with the additional disclosures required by Consob in its communication no. DEM/6064293 of July 28,2006 is attached.

Investments in other companies and the changes that occurred are set out below:

Disposals/At Acquisitions/ Capital Fair value At

(in thousands of euros) % interest December 31, 2005 Capital increases reimbursements adjustments December 31, 2006

Mediobanca S.p.A. 1.84 227,107 13,544 27,605 268,256Fin.Priv. S.r.l. 14.28 14,355 14,355Consortium S.r.l. 2.76 19,530 (19,243) 287Assicurazioni Generali S.p.A. 0.01 4,567 892 5,459Total investments in other companies 260,992 18,111 (19,243) 28,497 288,357


The loan of 2,709,592 thousand euros granted to Fiat Finance S.p.A. in 2005 consisted of 2,700,000 thousand euros as principalincreased by the accrued interest. It originally expired on January 16, 2006 and was then renewed and fully repaid in connectionwith the recapitalisation of the subsidiaries mentioned above (see Note 13).

The current account with Fiat Finance S.p.A. represents a balance of 358,252 thousand euros on the Group centralised treasurymanagement.

The item Amounts due from Intermap (Nederland) B.V. for derivative financial instruments consists of the fair value of the first ofthe two equity swaps on Fiat S.p.A. shares taken out with leading banks by Intermap (Nederland) B.V. under instruction from FiatS.p.A. to hedge the risk of a rise in the share price above the exercise price of the stock options granted to the company’s ChiefExecutive Officer in 2004, as described in Note 8, to which reference should be made for additional information. The fair valueof this equity swap has been calculated on the basis of the market price at the Balance Sheet date.

18. Other current receivablesAt December 31, 2006, other current receivables amount to 626,428 thousand euros, a decrease of 173,491 thousand euros overDecember 31, 2005. They are due as follows:

(in thousands of euros) At December 31, 2006 At December 31, 2005 Change

Intercompany receivables for consolidated IRES tax 146,847 74,024 72,823Other intercompany receivables 61 31,983 (31,922)VAT receivables 205,907 418,544 (212,637)IRES tax receivables 268,429 236,832 31,597Other 5,184 38,536 (33,352)Total Other current receivables 626,428 799,919 (173,491)

Intercompany receivables for consolidated IRES tax arise from the tax calculated on the taxable income contributed by the Italiansubsidiaries participating in the national tax consolidation program.

At December 31, 2005, the item Other intercompany receivables included IRES receivables sold to subsidiaries for tax prepaymentsmade on their behalf (30,894 thousand euros).

At December 31, 2005, the item VAT receivables included factored credits of 335,073 thousand euros which were reimbursedby tax authorities during 2006.

IRES tax receivables include receivables that the Italian subsidiaries participating in the national tax consolidation programtransferred to Fiat S.p.A. in the 2006 fiscal year and in previous fiscal years. At December 31, 2006 factored credits for whicha refund has been claimed amounted to 230,142 thousand euros (224,539 thousand euros at December 31, 2005).

At December 31, 2006, interest recognised on VAT receivables for which refund has been claimed (pro-rata portion for theconsolidated VAT) total 14,019 thousand euros (25,139 thousand euros at December 31, 2005) while that recognised on IREStax receivables (factored) amounts to 15,531 thousand euros (9,886 thousand euros at December 31, 2005).

15. Other non-current assetsAt December 31, 2006, other non-current assets amount to 1,573 thousand euros (4,502 thousand euros at December 31, 2005)and consist of amounts receivable from tax authorities due after one year.

16. Trade receivablesAt December 31, 2006, trade receivables amount to 154,692 thousand euros, a decrease of 60,960 thousand euros over December31, 2005. They are due as follows:


Third parties- Receivables 152,512 208,193 (55,681)- Allowance for doubtful accounts (228) (228) –Total third parties 152,284 207,965 (55,681)Intercompany trade receivables 2,408 7,687 (5,279)Total Trade receivables 154,692 215,652 (60,960)

Trade receivables from third parties mainly relate to amounts due from T.A.V. S.p.A. for the progress of works on high speed railsections during the latter part of 2006. These receivables match the trade payables resulting from the progress of the works to bepaid to the consortia CAV.E.T. and CAV.TO.MI. (see Note 25). The allowance for doubtful accounts has been calculated on the basisof an assessment of the risk on a number of minor receivables.

Intercompany trade receivables mainly relate to licence agreements for the use of the Fiat trademark.

The carrying amount of trade receivables is deemed to approximate their fair value.

All trade receivables are due within one year and there are no significant overdue balances.

17. Current financial receivablesAt December 31, 2006, current financial receivables total 84,173 thousand euros, a decrease of 2,991,721 thousand euros ascompared to December 31, 2005. They comprise intercompany loans and receivables as follows:


Loan to Fiat Finance S.p.A. – 2,709,592 (2,709,592)Current account with Fiat Finance S.p.A. – 358,252 (358,252)Amounts due from Intermap (Nederland) B.V. for derivative financial instruments 84,133 8,002 76,131Other receivables due from Fiat Finance S.p.A. and Intermap (Nederland) B.V. 40 48 (8)Total Current financial receivables 84,173 3,075,894 (2,991,721)


The profit for the year resulting from the annual financial statements of Fiat S.p.A. is to be allocated as follows:

n to the legal reserve, 5% of profit for the year until this reserve reaches one fifth of the capital stock;

n to savings shares, a dividend of up to 0.31 euros per share;

n to the legal reserve (additional allocation), to the extraordinary reserve and/or to retained earnings, such allocationsas shall be resolved by the Stockholders Meeting;

n to preference shares, a dividend of up to 0.31 euros per share;

n to ordinary shares, a dividend of up to 0.155 euros per share;

n to savings shares and ordinary shares, in equal proportions, an additional dividend of up to 0.155 euros per share and

n to each ordinary, preference and savings share, in equal proportions, the balance of the profit for the year which theStockholders Meeting resolves to distribute.

When the dividend paid to savings shares in any year amounts to less than 0.31 euros, the difference is added to the preferreddividend to which they are entitled in the following two years.

If the savings shares are delisted, they are transformed into registered shares if originally bearer shares, and have the rightto a higher dividend increased by 0.175 euros, rather than 0.155 euros, with respect to the dividend received by the ordinaryand preference shares.

If the ordinary shares are delisted, the higher dividend received by the savings shares with respect to the dividend receivedby ordinary and preference shares is increased by 0.2 euros per share.

As no dividends were distributed in 2004 and 2005, savings shares are entitled to an additional 0.62 euros per shareat December 31, 2006.

The reconciliation of the number of shares outstanding at December 31, 2004 and at December 31, 2006 is as follows:

(Purchases)/ (Purchases)/At Capital Sales of At Capital Sales of At

(no. of shares, in thousands) December 31, 2004 increase treasury stock December 31, 2005 increase treasury stock December 31, 2006

Ordinary shares issued 800,417 291,829 – 1,092,246 – – 1,092,246Less: Treasury stock (4,384) – 52 (4,332) – 559 (3,773)Ordinary shares outstanding 796,033 291,829 52 1,087,914 – 559 1,088,473

Preference shares issued 103,292 – – 103,292 – – 103,292Less: Treasury stock – – – – – – –Preference shares outstanding 103,292 – – 103,292 – – 103,292

Savings shares issued 79,913 – – 79,913 – – 79,913Less: Treasury stock – – – – – – –Savings shares outstanding 79,913 – – 79,913 – – 79,913

Total shares issued by Fiat S.p.A. 983,622 291,829 – 1,275,451 – – 1,275,451Less: Treasury stock (4,384) – 52 (4,332) – 559 (3,773)Total Fiat S.p.A. shares outstanding 979,238 291,829 52 1,271,119 – 559 1,271,678

The carrying amount of other current receivables is deemed to approximate their fair value.

Almost all other current receivables are due within one year, except for an amount of 59 thousand euros which is due betweenone and five years.

19. Cash and cash equivalentsCash and cash equivalents consist of the following:


Cash at banks and post offices 608 345 263Cheques and cash in hand – 150 (150)Total Cash and cash equivalents 608 495 113

The above figures related to on demand deposits in euros in the company’s bank current accounts. The carrying amount of cashand cash equivalents is deemed to be in line with their fair value.

The credit risk relating to cash and cash equivalents is insignificant since the counterparties are leading national and internationalbanks.

20. Stockholders’ equityStockholders’ equity amounts to 10,373,528 thousand euros at December 31, 2006, an increase of 2,388,969 thousand eurosas compared to December 31, 2005 resulting mostly from the profit for the year of 2,343,375 thousand euros.

Capital stockCapital stock amounts to 6,377,257 thousand euros at December 31, 2006, which may be analysed as follows:

At At(no. of shares) December 31, 2006 December 31, 2005

Shares issued and fully paid-up- Ordinary shares 1,092,246,316 1,092,246,316- Preference shares 103,292,310 103,292,310- Savings shares 79,912,800 79,912,800Total shares issued 1,275,451,426 1,275,451,426

All issued shares have a nominal value of 5 euros, with each category having rights as follows.

Each share conveys the right to a proportionate share of earnings available for distribution and of the residual net assets uponliquidation, without harming the rights of preference and savings shares on the allocation of the earnings as described in thefollowing paragraph.

Each ordinary share conveys the right to vote without any restrictions whatsoever. Each preference share conveys the right tovote only on issues that are within the purview of the Extraordinary Stockholders Meeting and on resolutions concerning theregulations for stockholders meetings. Savings shares are not entitled to vote.


Legal reserveThis reserve amounts to 446,562 thousand euros at year end, unchanged with respect to December 31, 2005 since net incomeis firstly used to cover accumulated losses.

Reserve for treasury stock in portfolioThis reserve totals 24,139 thousand euros at December 31, 2006, a decrease of 3,571 thousand euros over December 31, 2005,following the disposal of treasury stock during the year; as a result, the legal obligation of article 2357-ter of the Italian CivilCode is no longer applicable.

The amount of this reserve at December 31, 2006 corresponds to that approved by the Stockholders Meeting of May 11, 2004in proportion to treasury stock still owned by the company.

Extraordinary reserveAt December 31, 2006, the extraordinary reserve totals 6,135 thousand euros, with an increase of 5,800 thousand euros fromthe previous year due to the amounts received upon sale of treasury stock.

Retained earnings (losses)Losses carried forward total 553,412 thousand euros at year end, a decrease of 258,325 thousand euros, due to the portion of2005 profit not allocated to specific reserves. There were retained losses of 949,100 thousand euros at December 31, 2005 inthe financial statements prepared in accordance with Italian accounting principles; these losses were reduced to 726,081 thousandeuros following the allocation of 2005 profits by Stockholders Meeting held on May 3, 2006. The difference of 172,669 thousandeuros with respect to the balance of 553,412 thousand euros stated above is due to the adjustments made on transition to IFRS(on both stockholders’ equity at January 1, 2005 and the 2005 results) which were classified as retained earnings under IFRS andtherefore attributable to retained earnings (losses).

Treasury stockTreasury stock held by Fiat S.p.A. amounts to 24,139 thousand euros at year end and relates to 3,773,458 ordinary shares witha unit carrying amount of 6.397 euros generally servicing the stock option plans granted to employees up to September 12, 2002.

The 3,571 thousand euros decrease over the previous year is due to the disposal of 558,250 shares following the exercise duringthe year of a number of options granted in September 2002.

Gains (losses) recognised directly in equityAt December 31, 2006, net gains recognised directly in equity total 162,764 thousand euros, with a rise of 28,497 thousand eurosover the previous year.

The reserve includes gains and losses recognised directly in equity arising from the fair value adjustment of investments in othercompanies (Mediobanca S.p.A. and Assicurazioni Generali S.p.A.) as described previously (see Note 13).

Regarding changes in 2005, the Mandatory Convertible Facility was extinguished by its conversion to capital stock through subscriptionby the Lending Banks to an increase in capital stock for consideration, as approved by the Board of Directors on September 15, 2005;the operation took place on September 20, 2005. Capital stock increased in this manner from 4,918,113,540 euros to 6,377,257,130 euros,through the issuance of 291,828,718 ordinary shares, each with a par value of 5 euros, having the same characteristics as those currentlyin circulation, including dividend rights from January 1, 2005, pursuant to article 2441, paragraph 7 of the Italian civil code, at a price of10.28 euros, of which 5.28 euros represents share premium. The operation increased capital stock by 1,459,144 thousand euros,additional paid-in capital by 681,856 thousand euros, and generated non-recurring financial income of 857,636 million euros, net ofrelated costs (see Note 9).

Regarding 2006, treasury stock was sold when the stock options were exercised.

The following are significant matters with respect to the capital stock of Fiat S.p.A.:

n Pursuant to resolutions approved by the Board of Directors on December 10, 2001 and June 26, 2003, capital could have beenincreased through rights offerings up to a maximum of 81,886,460 euros by the issue of up to 16,377,292 ordinary shares at a par valueof 5 euros each on February 1, 2007, following the exercise of the “FIAT ordinary share warrants 2007”. Fiat had reserved the right topay the warrant holders in cash, starting on January 2, 2007, in lieu of the shares to be issued (shares in exchange for warrants), forthe difference between the average of the official market price of Fiat ordinary shares in December 2006 and the warrant exercise price,unless this difference exceeds the maximum amount set and previously communicated by Fiat S.p.A., in which case the holder of thewarrants could nevertheless have opted to subscribe to the shares in exchange for the warrants. Following exercise of 4,676 “FIATordinary share warrants 2007”, on February 1, 2007 a total of 1,169 shares were issued for a consideration of 34,326.51 euros. Theremaining warrants have expired and have accordingly been cancelled.

n Pursuant to the resolution approved by stockholders in their extraordinary meeting of September 12, 2002, the Board of Directorshas the right to increase the capital one or more times by September 11, 2007, up to a maximum of 8 billion euros.

n At its meeting of November 3, 2006, the Board exercised its delegated powers pursuant to Article 2443 of the Italian Civil Code for thecapital increase to service the incentive plan. The capital increase is reserved to employees of the company and/or subsidiaries within alimit of 1% of the capital stock, i.e. for a maximum of 50,000,000 euros through the issuance of a maximum of 10,000,000 ordinary shareswith a par value of 5 euros each, corresponding to 0.78% of the capital stock and 0.92% of the ordinary capital, at a price of 13.37 eurosper share, to service the new stock option plan for employees, described in the following paragraph. Execution of this capital increase issubject to the approval by the Stockholders Meeting of the incentive plan and is dependant on the conditions of the plan being satisfied.

Additional paid-in capitalAt December 31, 2006, additional paid-in capital amounts to 1,540,856 thousand euros. The 859,000 thousand euros increase is dueto the allocation thereto of the portion of 2005 profit relating to the non-recurring financial income recognised in the Income Statementunder IFRS. Such income arose in connection with the 2005 capital increase as a result of the extinguishment of the MandatoryConvertible Facility and its conversion to capital stock. As described in Note 9, the amount is the difference between the subscriptionprice of 10.28 euros per share and the market value of 7.337 euros per share at the subscription date. However, the recognition of suchamount as income does not affect its substantial nature of share premium and it should be treated as such pursuant to article 2431 of theItalian Civil Code. Therefore, the portion of 2005 profit recognised under IFRS and relating to such share premium has been recorded asan increase in the additional paid-in capital that had already been recognised in connection with the above-mentioned capital increase.

Reserve under Law no. 413/1991This reserve amounts to 22,591 thousand euros at year end, unchanged with respect to December 31, 2005. It reflects the mandatoryrevaluation of property (net of the related substitute reserve) made pursuant to Law no. 413 of December 30, 1991, taken to thisspecific reserve in accordance with that law.


On July 26, 2004, the Board of Directors granted to Sergio Marchionne as a part of his compensation as Chief Executive Officeroptions for the purchase of 10,670,000 Fiat S.p.A. ordinary shares at the price of 6.583 euros, exercisable from June 1, 2008 toJanuary 1, 2011. In each of the first three years following the grant date, the Officer accrues the right to purchase, starting fromJune 1, 2008, an annual maximum of 2,370,000 shares. From June 1, 2008, he will have the right to exercise, effective at that date,the residual portion of the options on 3,560,000 shares. This right is subject to achieving certain pre-determined profitabilitytargets (Non-Market Conditions or “NMC”).

The contractual terms of the plan are as follows:

Strike price Number of Plan Grant date Expiry date (euros) options granted Vesting date Vesting portion

Stock Option July 26, 2004 January 1, 2011 6.583 10,670,000 June 1, 2005 22.2%July 2004 June 1, 2006 22.2%

June 1, 2007 22.2%June 1, 2008 33.4%*NMC

On November 3, 2006 the Fiat S.p.A. Board of Directors approved an eight year stock option plan, which provides certain managersof the Group and the Chief Executive Officer with the right to purchase a determined number of Fiat S.p.A. ordinary shares at thefixed price of 13.37 euros per share. In particular, the 10,000,000 options granted to employees and the 5,000,000 options grantedto the Chief Executive Officer have a vesting period of four years, with a quarter of the number vesting each year, are subject toachieving certain pre-determined profitability targets (Non-Market Conditions or “NMC”) in the reference period and may beexercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options granted to theChief Executive Officer of Fiat S.p.A. also have a vesting period of four years with a quarter of the number vesting each yearand may be exercised from November 2010.

The ability to exercise the options is additionally subject to specific restrictions regarding the duration of the employmentrelationship or the mandate given. The stock option plan will become effective after approval by the Stockholders Meetingand once all its conditions have been satisfied.

The contractual terms of 2006 plans proposed by Board of Directors are as follows:

Strike price Number of Plan Recipient Expiry date (euros) options granted Vesting date Vesting portion

Stock Option Chief Executive Officer November 3, 2014 13.37 5,000,000 November 2007 25%November 2006 November 2008 25%

November 2009 25%November 2010 25%

Stock Option Chief Executive Officer November 3, 2014 13.37 5,000,000 Spring 2008 (*) 25%*NMCNovember 2006 Spring 2009 (*) 25%*NMC


Stock Option Executives November 3, 2014 13.37 10,000,000 Spring 2008 (*) 25%*NMCNovember 2006 Spring 2009 (*) 25%*NMC


(*) On the approval of the Financial Statements of the previous year.

Stock option reserveAs discussed in Note 5, the overall expense recognised in 2006 for share-based payments linked to Fiat S.p.A. shares is 11,297 thousandeuros (10,041 thousand euros in 2005).

The accumulated stock option reserve totals 27,400 thousand euros at December 31, 2006 (16,103 thousand euros at December 31, 2005).

Share-based paymentsAt December 31, 2006, Fiat S.p.A. has various share-based payment plans for the executives of Group companies and membersof the Board of Directors of Fiat S.p.A.

Stock Option plans linked to Fiat S.p.A. ordinary shares The Board of Directors of Fiat S.p.A. approved certain stock option plans between March 1999 and September 2002 which provideexecutives of the Group with the title of “direttore” and high management potential included in “management developmentprogrammes” and members of the Board of Directors of Fiat S.p.A. with the right to purchase a determined number of Fiat S.p.A.ordinary shares at a fixed price (strike price). These rights may be exercised over a fixed period of time from the vesting date tothe expiry date of the plan. These stock option plans do not depend on any specific market conditions.

In accordance with applicable tax regulations, options are generally exercisable after three years from the grant date and forthe following six years. Nevertheless the full amount granted as options is not exercisable until the end of the fourth year.

The contractual terms of these plans are as follows: Strike price Number of

Plan Recipient Grant date Expiry date (euros) options granted Vesting date Vesting portion

Stock Option 1999 Executives March 30, 1999 March 31, 2007 26.120 1,248,000 April 1, 2001 50%April 1, 2002 50%

Stock Option 2000 Executives February 18, 2000 February 18, 2008 28.122 5,158,000 February 18, 2001 25%February 18, 2002 25%February 18, 2003 25%February 18, 2004 25%

Stock Option Chairman of B.o.D. July 25, 2000 July 25, 2008 25.459 250,000 July 25, 2001 50%July 2000 May 14, 2002 50%Stock Option Executives February 27, 2001 February 27, 2009 24.853 785,000 February 27, 2002 25%February 2001 February 27, 2003 25%

February 27, 2004 25%February 27, 2005 25%

Stock Option March 2001 Chairman of B.o.D. March 29, 2001 October 30, 2008 23.708 1,000,000 July 1, 2002 100%Stock Option Executives October 31, 2001 October 31, 2009 16.526 5,417,500 October 31, 2002 25%October 2001 October 31, 2003 25%

October 31, 2004 25%October 31, 2005 25%

Stock Option May 2002 Chairman of B.o.D. May 14, 2002 January 1, 2010 12.699 1,000,000 January 1, 2005 100%Stock Option Executives September 12, 2002 September 12, 2010 10.397 6,100,000 September 12, 2003 25%September 2002 September 12, 2004 25%

September 12, 2005 25%September 12, 2006 25%


stock option plans. For the stock options plans of July 2004 and November 2006, the fair value calculated at the grant date usedto determine the compensation expense to be accrued, based on a binomial pricing model is based on the following assumptions:

Plan of July 2004 Plan of November 2006

Average unit fair value at grant date 2.440 3.99Price of Fiat S.p.A. ordinary shares at grant date (euros) 6.466 14.425Historical volatility of Fiat S.p.A. ordinary share (%) 29.37 28.33

In addition, it is recalled that the dividend payment rate used in the determination of the fair value at the plan grant date in July2004 was assumed to be zero, based on the experience in the period from 2003 to 2005. In determining the fair value of theNovember 2006 plan the recent statements made on future dividend prospects have been considered instead (25% of consolidatedincome).

The following disclosures complete the information provided on equity items:

Availability for use of equity items

(in thousands of euros) At December 31, 2006 Possible use Available amount

Capital stock 6,377,257Reserves:- Additional paid-in capital 1,540,856 A, B, C (*) 1,540,856- Reserve under Law no. 413/1991 22,591 A, B, C 22,591- Legal reserve 446,562 B –- Reserve for treasury stock in portfolio 24,139 – –- Extraordinary reserve 6,135 A, B, C 6,135- Gains (losses) recognised directly in equity 162,764 – –- Stock option reserve 27,400 – –Total 8,607,704

Key:A: capital increaseB: coverage of lossesC: dividend

(*) Fully available to increase capital and cover losses. Any other use requires an increase of the legal reserve up to 20% of capital stock (this may also be carried out by making a transfer fromadditional paid-in capital itself). The increase required for this at December 31, 2006 would be 828,889 thousand euros.

A summary of outstanding stock option plans at December 31, 2006 is as follows:


Average remaining Average remainingNo. of options No. of options contractual life No. of options No. of options contractual lifeoutstanding at outstanding at (in years) at outstanding at outstanding at (in years) at

Exercise price (euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2006 December 31, 2005 December 31, 2006

6.583 – – – 10,670,000 10,670,000 4.010.397 2,117,000 3,046,500 3.7 – – –12.699 – – – 1,000,000 1,000,000 3.013.37 (*) 10,000,000 – 7.8 10,000,000 – 7.816.526 1,943,500 2,299,000 2.8 – – –23.708 – – – 1,000,000 1,000,000 1.824.853 80,000 300,000 2.2 – – –25.459 – – – 250,000 250,000 1.626.120 241,900 316,000 0.3 – – –28.122 1,051,500 1,788,000 1.1 – – –Total (*) 15,433,900 7,749,500 22,920,000 12,920,000

(*) The granting of 20,000,000 stock options (of which 10,000,000 granted to managers and 10,000,000 granted to the Chief Executive Officer), approved by the Board of Directors on November 3,2006, is subject to approval by the Stockholders Meeting pursuant to law.

Changes during the year are as follows:


Average AverageNumber exercise price Number exercise price

of shares (euros) of shares (euros)

Outstanding at the beginning of the year 7,749,500 17.51 12,920,000 8.75Granted (*) 10,000,000 13.37 10,000,000 13.37 Forfeited – – – –Exercised (558,250) 10.397 – –Expired (1,757,350) 21.54 – –Outstanding at December 31, 2006 (*) 15,433,900 14.62 22,920,000 10.76Exercisable at December 31, 2006 5,433,900 16.93 2,250,000 19.01Exercisable at December 31, 2005 6,987,875 18.28 2,250,000 19.01

(*) The granting of 20,000,000 stock options (of which 10,000,000 granted to managers and 10,000,000 granted to the Chief Executive Officer), approved by the Board of Directors on November 3,2006, is subject to approval by the Stockholders Meeting pursuant to law.

The majority of options that had been granted to managers were exercised during the fourth quarter of the year. The average priceof Fiat S.p.A. ordinary shares during this period was 14.14 euros.

As discussed under Significant accounting policies, in the case of share-based payments Fiat S.p.A. applies IFRS 2 to all stockoptions granted after November 7, 2002, which had not yet vested at January 1, 2005, namely the July 2004 and November 2006


Post-employment benefits and Other long-term employee benefits are calculated on the basis of the following actuarialassumptions:

At AtDecember 31, 2006 December 31, 2005

Discount rate 3.93% 3.29%Future salary increase rate 4.28% 1.95%Inflation rate 2.00% 2.00%Theoretical retirement age Years: 60 (F) – 65 (M) Years: 60 (F) – 65 (M)Mortality rate SI99 SI99Average annual departure rate 9.79% 8.73%

The provisions for employee benefits may be summarised as follows:

Employee severance indemnityThe employee severance indemnity is recognised as required by Italian labour legislation. This provision is used to pay employeesleaving the company for any reason and can be partially paid in advance if certain conditions are met. This defined benefit plan isunfunded.

OtherThe item Other includes post-employment benefits accrued by employees, former employees and the Chief Executive Officerfollowing additional or individual labour agreements. These schemes are unfunded.

Other long-term employee benefitsThis item mainly includes benefits which are due to employees who reach a specified seniority.

Post-employment benefits at December 31, 2006 and 2005 are made up as follows:

Employee severance indemnity Other Total

At At At At At At(in thousands of euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005

Present value of unfunded defined benefit plan obligations 8,412 12,792 13,655 18,250 22,067 31,042Unrecognised actuarial gains (losses) (1,696) (1,300) (3,804) (1,808) (5,500) (3,108)Net liability 6,716 11,492 9,851 16,442 16,567 27,934

21. Provisions for employee benefits and other non-current provisionsAt December 31, 2006, provisions for employee benefits and other non-current provisions amounts to 18,104 thousand euros, adecrease of 11,067 thousand euros as compared to December 31, 2005 and is made up as follows:

At At(in thousands of euros) December 31, 2005 Accruals Utilisations Other changes December 31, 2006

Provisions for employee benefits 29,124 3,386 (14,477) 38 18,071Other non-current provisions 47 – (14) – 33Total Provisions for employee benefits and other non-current provisions 29,171 3,386 (14,491) 38 18,104

Provisions for employee benefitsThe company provides post-employment benefits for its employees, either directly or by contributing to independentlyadministered funds.

The benefits are generally based on the employees’ remuneration and years of service. The obligations relate both to activeemployees and to retirees.

The company provides post-employment benefits under defined contribution and/or defined benefit plans.

In the case of defined contribution plans, the company pays contributions to publicly or privately administered pension insuranceplans on a mandatory, contractual or voluntary basis. Once the contributions have been paid the company has no further paymentobligations. Liabilities for contributions accrued but not yet paid at the Balance Sheet date are included in the item Other payables(see Note 27). The company recognises the contribution cost for the year on the basis of the service rendered by the employee inthe item Personnel costs (see Note 5).

In the case of post-employment benefits the company’s obligation is determined on an actuarial basis, using the Projected UnitCredit Method. Any resulting actuarial gains and losses are accounted for using the corridor approach.

Finally, the company grants certain other long-term benefits to its employees; these benefits include those generally paid whenthe employee attains a specific seniority. In this case, the measurement of the obligation reflects the probability that paymentwill be made and the period over which the payment is expected to be made. The amount of this obligation is calculated on anactuarial basis using the Projected Unit Credit Method. The corridor approach is not used for the actuarial gains and losses arisingfrom this obligation.

Changes in provisions for employee benefits during the year are as follows:

At At(in thousands of euros) December 31, 2005 Accruals Utilisations Other changes December 31, 2006

Post-employment benefits:- Employee severance indemnity 11,492 1,128 (6,080) 176 6,716- Other 16,442 1,944 (8,397) (138) 9,851Total post-employment benefits 27,934 3,072 (14,477) 38 16,567Other long-term employee benefits 1,190 314 – – 1,504Total Provisions for employee benefits 29,124 3,386 (14,477) 38 18,071


Other non-current provisionsOther non-current provisions at December, 31 2006 total 33 thousand euros (47 thousand euros at December 31, 2005) and relateto sums set aside to pay scholarship grants to employees’ children.

22. Non-current financial payablesAt December 31, 2006, non-current financial payables amount to 2,810,029 thousand euros, an increase of 2,804,767 thousandeuros over December 31, 2005. The balance relates to the following:


Financial payables to Group companies 2,800,000 – 2,800,000Financial guarantee contracts 10,029 5,262 4,767Total Non-current financial liabilities 2,810,029 5,262 2,804,767

Financial payables to Group companies relate to the euro loans due beyond one year extended by Fiat Finance S.p.A. in the firsthalf of 2006 in connection with the recapitalisation of subsidiaries already mentioned (see Note 13). Interest accrued on these loansranges between 6.20% and 7.18%.

An analysis of loans received by repayment date is as follows:

(in thousands of euros) At December 31, 2006

Maturity 2010 400,000Maturity 2011 1,400,000Maturity 2013 1,000,000Total Financial payables to Group companies 2,800,000

The fair value of these loans at December 31, 2006 is approximately 3 billion euros; the difference between this and their originalvalue (being their nominal value) is essentially due to the improvement in the credit merit of Fiat S.p.A. Fair value was calculatedby taking market rates and adjusting these as appropriate to take into account Fiat’s credit spread at the Balance Sheet date.

The item financial guarantee contracts consists of the fair value of the liabilities assumed as the result of providing guarantees.After assessing the possibility of any risks for which provisions for contingent liabilities must be recognised and after determiningthat this item relates essentially only to guarantees provided on behalf of Group company loans, it has been concluded that thepresent value of the fees receivable for guarantees given (see Other financial assets in Note 14) represents the best estimate ofthe fair value of these guarantees.

This item may be analysed by maturity date as follows:


Financial guarantee contractsdue within one year 2,512 1,331

due after one year but within five years 7,473 3,044due beyond five years 44 887

total 10,029 5,262

The amounts recognised in the Income Statement for post-employment benefits are as follows:


(in thousands of euros) 2006 2005 2006 2005 2006 2005

Service cost- Current service cost 712 704 1,137 1,139 1,849 1,843- Net actuarial (gains) losses recognised during the year 94 – 397 1,003 491 1,003Total current service cost 806 704 1,534 2,142 2,340 2,846Interest costs 322 278 410 377 732 655Total cost (income) for post-employment benefits 1,128 982 1,944 2,519 3,072 3,501

The items Current service cost and Net actuarial (gains) losses recognised during the year are recorded in the Income Statementitem Personnel costs (see Note 5) if relating to employees and in Other operating costs (see Note 6) if relating to the ChiefExecutive Officer.

Interest expense is recognised under the Income Statement item Financial income (expenses) (see Note 8).

Changes in the present value of the obligation for post-employment benefits are as follows:


(in thousands of euros) 2006 2005 2006 2005 2006 2005

Present value of obligation at the beginning of the year 12,792 11,651 18,250 17,838 31,042 29,489Current service cost 621 943 1,137 1,139 1,758 2,082Interest costs 322 278 410 377 732 655Actuarial (gains) losses arising during the year 581 825 2,394 867 2,975 1,692Benefits paid (6,080) (1,807) (8,397) (1,971) (14,477) (3,778)Other changes 176 902 (139) – 37 902Present value of obligation at the end of the year 8,412 12,792 13,655 18,250 22,067 31,042

The present value of the defined benefit obligations in 2006 and at the end of the two previous years is as follows:

At At At(in thousands of euros) December 31, 2006 December 31, 2005 December 31, 2004

Present value of obligation at the end of the year:- Employee severance indemnity 8,412 12,792 11,651- Others 13,655 18,250 17,838Total 22,067 31,042 29,489

The effects of the differences between the previous actuarial assumptions and what has actually occurred (experience adjustments)at December 31, 2006 and 2005, is as follows:


Experience adjustments actuarial (gains) losses:- Employee severance indemnity 83 783- Others 1,769 2,545Total effect on the present value of defined benefit obligation 1,852 3,328


The provision for indemnities relates to the contingent liabilities arising from guarantee commitments and obligations to thirdparties assumed when subsidiaries have sold their investments or business units.

The restructuring provision includes the employee termination benefits to be paid in accordance with the company’s rationalisationplans.

The provision for employee bonuses comprises the expected cost for the annual performance bonuses.

25. Trade payablesAt December 31, 2006, trade payables amount to 184,661 thousand euros, a decrease of 200,521 thousand euros as comparedto December 31, 2005. The balance can be analysed as follows:


Trade payables to third parties 167,115 380,335 (213,220)Intercompany trade payables for goods and services 17,546 4,847 12,699Total Trade payables 184,661 385,182 (200,521)

Trade payables to third parties are mainly due to CAV.E.T. and CAV. TO.MI. in relation to the work performed over the latterpart of the year (see Note 16).

Trade payables are due within one year and their carrying amount at the Balance Sheet date is deemed to approximate theirfair value.

26. Current financial payablesAt December 31, 2006, current financial payables amount to 1,627,430 thousand euros, up 1,070,047 thousand euros overDecember 31, 2005. The balance can be analysed as follows:


Financial payables to Group companies:

- Current account with Fiat Finance S.p.A. 426,538 – 426,538

- Loan from Fiat Finance S.p.A. 900,000 – 900,000

- Payables to Group companies for derivative financial instruments 10,315 – 10,315

- Accrued interest expense 68,701 434 68,267

Total financial payables to Group companies 1,405,554 434 1,405,120

Financial payables to third parties:

- Advances on factored receivables 221,876 556,949 (335,073)

Total financial payables to third parties 221,876 556,949 (335,073)

Total Current financial payables 1,627,430 557,383 1,070,047

The loan from Fiat Finance S.p.A. was obtained at the end of 2006 with maturity in the first quarter of 2007.

23. Other non-current liabilitiesAt December 31, 2006, Other non-current liabilities amount to 20,001 thousand euros, showing a net increase of 3,140 thousandeuros over the balance at the previous year end.

The item may be analysed as follows:


Non-current post-employment benefits to be paid:- to the former Chief Executive Officer 5,542 5,807 (265)- to former employees 14,459 8,432 6,027Non-current intercompany payables for consolidated IRES tax – 2,622 (2,622)Total Other non-current liabilities 20,001 16,861 3,140

The non-current post-employment benefits to be paid represent the present value of benefits (see Note 21) to be paid to the formerChief Executive Officer and employees that left the company.

The balance of 2,622 thousand euros at December 31, 2005 for intercompany payables for consolidated IRES tax relates to itemstransferred in connection with the national tax consolidation program in previous years whose liquidity status is subject to certainconditions.

An analysis of other non-current liabilities by due date is as follows:


Other non-current liabilitiesdue within one year 866 609

due after one year but within five years 4,814 5,690due after five years 14,321 10,562

total 20,001 16,861

24. Provisions for employee benefits and other current provisionsAt December 31, 2006 this balance amounts to 26,791 thousand euros, a decrease of 4,200 thousand euros over December 31,2005, and may be analysed as follows:

At At(in thousands of euros) December 31, 2005 Accruals Utilisations December 31, 2006

Provision for contractual fees 23,256 – (23,256) –Provision for indemnities – 18,000 – 18,000Restructuring provision 4,115 1,890 (4,115) 1,890Provision for employee bonuses 3,620 6,901 (3,620) 6,901Total Provisions for employee benefits and other current provisions 30,991 26,791 (30,991) 26,791

The provision for contractual fees at December 31, 2005 was made with respect to any fees that would have been payable toMediobanca S.p.A. if the latter had listed the Ferrari S.p.A. shares sold in 2002. As discussed above (see Note 13) the provisionhas been used to reduce the carrying amount of the investment in Ferrari S.p.A. repurchased during the year.


AdvancesThis item consists of the difference between inventories and progress payments and contractual advances received fromthe customer Treno Alta Velocità – T.A.V. S.p.A. for contract work in progress and is made up as follows:


Contract work in progress 352,879 308,503 44,376Less: Progress payments for work completed 357,891 319,389 38,502Gross amount due to the customer 5,012 10,886 (5,874)Contractual advances 7,906 11,068 (3,162)Total Advances 12,918 21,954 (9,036)

The item relates to contracts for the high speed railway project signed by Fiat S.p.A. with Treno Alta Velocità - T.A.V. S.p.A. (which was inturn engaged by F.S. S.p.A.), for the operational engineering and construction of two lines (Bologna-Florence and Turin-Milan, the latterdivided into two sub-lines: Turin-Novara and Novara-Milan). At December 31, 2006, the contractual amounts (including additional workand monetary adjustments) total 4,386 million euros for the Bologna-Florence line, 4,588 million euros for the Turin-Novara sub-line and2,212 million euros for the Novara-Milan sub-line.

As part of such project, Fiat S.p.A., as the general contractor, engaged CAV.E.T. and CAV.TO.MI. for the engineering and constructionactivities, retaining all work coordination, organisational and management activities. Contract work in progress therefore reflects the feesearned by Fiat S.p.A. in the form of a percentage (roughly 3.6%) of the contractual amounts, for the activities directly carried out. Thework is paid through progress payments made by T.A.V. S.p.A. to Fiat S.p.A. based on the stage of completion of the works and advancepayments, which Fiat S.p.A. then pays over to CAV.E.T. and CAV.TO.MI. net of its contractual percentage earned.

These amounts may be analysed by line as follows:


Contract work in progress 352,879 308,503 44,376- Florence-Bologna line 129,754 119,697 10,057 - Turin-Novara line 179,703 164,039 15,664 - Novara-Milan line 43,422 24,767 18,655 Less: Progress payments for work completed 357,891 319,389 38,502- Florence-Bologna line 132,416 124,835 7,581 - Turin-Novara line 180,002 169,202 10,800 - Novara-Milan line 45,473 25,352 20,121 Gross amount due to the customer 5,012 10,886 (5,874)- Florence-Bologna line 2,662 5,138 (2,476)- Turin-Novara line 299 5,163 (4,864)- Novara-Milan line 2,051 585 1,466

Contract work in progress is measured on the basis of the stage of completion in relation to the sales price, which in this case is theconsideration contractually agreed for the activities directly carried out by Fiat S.p.A. Contract costs relating to the contract revenuerecognised total 116,060 thousand euros at December, 31 2006 (104,838 thousand euros at December 31, 2005). Changes in contractwork in progress have been recognised in the Income Statement under the item Other operating income (see Note 4). When the linesare contractually completed, the final contractual revenue for the activities directly carried out will be recognised in the IncomeStatement under Other operating income, net of any decrease in inventories. At the same time the accounts for inventories andamounts classified as advances will be closed.

The item Payables to Group companies for derivative financial instruments consists of the fair value of the hedging derivativefinancial instruments outstanding at December 31, 2006 and the fair value of the equity swap on Fiat shares taken out with leadingbanks by Intermap (Nederland) B.V. under instruction from Fiat S.p.A. to hedge the risk of a rise in the share price above theexercise price of the stock options granted to the company’s Chief Executive Officer in 2006, as described in Note 8, to whichreference should be made for additional information. The fair value of this equity swap has been calculated on the basis of themarket price at the Balance Sheet date.

Advances on factored receivables relate to IRES receivables.

Current financial payables are denominated in euros. Their carrying amount is deemed to be in line with their fair value.

27. Other payablesAt December 31, 2006, other payables amount to 361,247 thousand euros, an increase of 110,991 thousand euros overDecember 31, 2005. The balance may be analysed as follows:


Advances 12,918 21,954 (9,036)Other payables:- Intercompany payables

- Consolidated VAT 160,957 117,028 43,929- Consolidated IRES tax 154,910 97,926 56,984- Other intercompany payables 3,211 425 2,786

- Total intercompany payables 319,078 215,379 103,699- Social security payables 1,353 1,717 (364)- Consolidated VAT payables to third parties (former Group companies) 13,928 – 13,928- Current amounts payable to employees, directors and statutory auditors 6,802 6,359 443- Payables to stockholders of Toro Assicurazioni S.p.A., Magneti Marelli S.p.A.

and Comau S.p.A. for public offerings 864 864 –- Dividends payable 246 248 (2)- Other 200 898 (698)Total other payables 342,471 225,465 117,006Tax payables: - VAT payable – – –- Taxes withheld on payments to employees and independent contractors 3,422 2,322 1,100- Tax payable 1,627 – 1,627- Other 739 428 311Total tax payables 5,788 2,750 3,038Accrued expenses and deferred income 70 87 (17)Total Other liabilities 361,247 250,256 110,991


At December 31, 2006, payables to Group companies in connection with the IRES tax consolidation amounted to 154,910 thousandeuros (97,926 thousand euros at December 31, 2005) and represent the remuneration due for the tax losses contributed by theItalian subsidiaries to the national tax consolidation for 2006 and for the IRES tax credits of the Italian subsidiaries transferredto Fiat S.p.A. as part of the tax consolidation procedure.

Tax payables and other payables are all due within one year and their carrying amount is deemed to approximate their fair value.

28. Guarantees granted, commitments and contingent liabilities

Guarantees grantedThis item is made up as follows:

(in thousands of euros) 2006 2005 Change

Guarantees grantedSureties- on behalf of Group companies 569,288 797,457 (228,169)- on behalf of third parties 96,011 460,303 (364,292)Total sureties 665,299 1,257,760 (592,461)Other personal guarantees- on behalf of Group companies 6,748,140 7,059,768 (311,628)- on behalf of third parties 152,404 160,937 (8,533)Total other personal guarantees 6,900,544 7,220,705 (320,161)Total Guarantees granted 7,565,843 8,478,465 (912,622)

SuretiesAt December 31, 2006, sureties amount to 665,299 thousand euros, a decrease of 592,461 thousand euros over December 31, 2005.

This balance mostly relates to sureties granted on behalf of Group companies on Billets de Trésorerie issued (Fiat Financeand Trade Ltd. 165,115 thousand euros), medium- to long-term loans granted by banks (214,580 thousand euros) and the rentalpayments relating to buildings included in the property securitisation transactions carried out in previous years (189,593 thousandeuros). Sureties granted on behalf of third parties mainly relate to the Sava savings bonds still outstanding (46,011 thousandeuros, a decrease of 364,292 thousand euros over December 31, 2005).

Other personal guaranteesAt December 31, 2006, other personal guarantees amount to 6,900,544 thousand euros, a decrease of 320,161 thousand eurosover December 31, 2005.

Net advances relating to work completed may be analysed as follows:

Advances received from customers Advances paid to suppliers Net advances for work completed

At At At At At At(in thousands of euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005 December 31, 2006 December 31,2005

Florence-Bologna line 3,774,803 3,398,254 3,642,387 3,273,419 132,416 124,835Turin-Novara line 4,552,834 4,267,724 4,372,832 4,098,522 180,002 169,202Novara-Milan line 1,218,035 664,444 1,172,562 639,092 45,473 25,352Progress payments for work completed 9,545,672 8,330,422 9,187,781 8,011,033 357,891 319,389

Advances relate to amounts received as down payments from the customer T.A.V. S.p.A. at the commencement of the contracts,which are then recovered as the work progresses. The balance may be analysed as follows:

Contractual advances Contractual advancesreceived from customers paid to suppliers Net contractual advances

At At At At At At(in thousands of euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005

Florence-Bologna line 70,871 88,672 68,146 85,262 2,725 3,410Turin-Novara line 3,486 36,320 3,358 36,440 128 (120)Novara-Milan line 135,034 201,248 129,981 193,470 5,053 7,778Contractual advances 209,391 326,240 201,485 315,172 7,906 11,068

The company provided T.A.V. S.p.A. with bank sureties to secure these advances and for the proper performance of the work fora total of 1,877,521 thousand euros at December 31, 2006 (of which 695,243 thousand euros relating to the Bologna Florence line,742,882 thousand euros to the Turin-Novara sub-line and 439,396 thousand euros to the Novara-Milan sub-line). On the other hand,as contractually provided for, CAV.E.T. provided Fiat S.p.A. with bank sureties totalling 669,582 thousand euros, while CAV.TO.MIprovided bank sureties of 714,754 thousand euros for the Turin-Novara sub-line and 422,895 thousand euros for the Novara-Milansub-line.

No retentions were made in relation to the amounts due from T.A.V. S.p.A. since they have been replaced with a portionof the bank sureties mentioned above.

Lastly, in line with the contractual terms and with the prior approval of the testing commission given to RFI – Rete FerroviariaItaliana S.p.A., the Turin-Novara high speed line was opened to the public in February 2006. Moreover, the company signed anagreement with T.A.V. S.p.A. in December 2006 for the acknowledgment of the substantial completion of the work on the line.However, since all contractually required checks for the formal approval of the work were still underway at December 31, 2006and, therefore, the bank sureties had not yet been released, this line has not been closed from an accounting standpoint.

Tax payables and other payablesThe main components of these items are as follows.

At December 31, 2006, intercompany payables for consolidated VAT of 160,957 thousand euros (117,028 thousand euros atDecember 31, 2005) relate to the VAT credits of Italian subsidiaries transferred to Fiat S.p.A. as part of the consolidated VATprocedure.


TeksidFiat S.p.A. is subject to a put contract with Renault (in reference to the original investment of 33.5% in Teksid, now 15.2%).

In particular, Renault would acquire the right to exercise a sale option to Fiat on its interest in Teksid, in the following cases:

n in the event of nonfulfilment in the application of the protocol of the agreement and admission to receivership or any otherredressment procedure;

n in the event Renault’s investment in Teksid falls below 15% or Teksid decides to invest in a structural manner outside the foundrysector;

n should Fiat be the object of the acquisition of control by another car manufacturer.

The exercise price of the option is established as follows:

n for 6.5% of the capital stock of Teksid, the initial investment price increased by a given interest rate;

n for the remaining amount of capital stock of Teksid, the share of the accounting net equity at the exercise date.

Contingent liabilitiesIn connection with significant asset divestitures carried out in 2006 and in prior years, Fiat S.p.A. directly or indirectly throughits subsidiaries provided indemnities to purchasers with the maximum amount of potential liability under these contracts generallycapped at a percentage of the purchase price. These liabilities primarily relate to potential liabilities arising from contingentliabilities in existence at the time of the sale, as well as breach of representations and warranties provided in the contracts and,in certain instances, environmental or tax matters, generally for a limited period of time. At December 31, 2006, potentialobligations with respect to these indemnities are approximately 810 million euros (approximately 750 million euros at December31, 2005), net of provisions set aside by the single companies. Certain other indemnifications have been provided that do not limitpotential payment; it is not possible to estimate a maximum amount of potential future payments that could result from claimsmade under these indemnities.

Certain claims against Fiat S.p.A. for damages in relation to real estate properties sold in previous years are still pending. Giventhis fact and the specific conditions of the related proceedings, the possible outcome of this situation cannot be reasonablyestimated and, therefore, the likelihood of any costs to be borne by the company cannot be determined.

29. Information on financial risksThe manner in which Fiat S.p.A. measures and manages financial risks are consistent with Group policy.

In particular, the categories of the major risks to which the company is exposed are set out in the following.

These relate to:

n guarantees of 6,748,140 thousand euros granted on behalf of Group companies, including:

– 790,193 thousand euros for loans (Banco CNH Capital S.A. 603,861 thousand euros, CNH America LLC 38,656 thousand euros,Fiat Automoveis S.A. 112,203 thousand euros, Magneti Marelli Controle Motor Ltda. 2,753 thousand euros and Fiat FinanceCanada Ltd. 32,720 thousand euros);

– 5,188,361 thousand euros for bond issuances (Fiat Finance and Trade Ltd. 5,175,306 thousand euros and Fiat FinanceLuxembourg S.A. 13,055 thousand euros);

– 186,373 thousand euros for credit facilities (CNH Capital America LLC 113,895 thousand euros, Iveco France S.A. 30,000 thousandeuros, Fiat Finance North America Inc. 30,354 thousand euros, Fiat Automoveis S.A. 1,466 thousand euros, Fiat India PrivateLimited 9,619 thousand euros, Comau India Private Limited 1,037 thousand euros);

– 469,627 thousand euros for VAT receivables as part of the tax consolidation procedure, as required by the Ministerial Decreeof December 13, 1979 as subsequently amended, and 113,586 thousand euros for other guarantees;

n guarantees of 152,404 thousand euros granted on behalf of third parties (former Group companies, mainly on VAT receivables).

In addition:

n as part of an agreement signed on June 22, 2005 with a pool of national and international banks headed by CitibankInternational, Fiat S.p.A. has provided guarantees on the use of a new three-year credit facility of 1 billion euros granted to FiatFinance S.p.A. and other Group companies. At December 31, 2006 the facility had not yet been used. In addition, Fiat S.p.A. hasgranted CNH Global N.V. and its subsidiaries a revolving credit facility of 1 billion dollars usable with the Group treasuries andexpiring at the end of January 2007. This facility was not renewed on expiry by Fiat S.p.A. but by the Group’s treasury companieswith whom it may be utilised until its expiry on 28 February 2008;

n in 2005, in relation to the early collection by Fiat Partecipazioni S.p.A. of the residual consideration for the sale of the aviationbusiness, Fiat S.p.A. is jointly and severally liable with Fiat Partecipazioni S.p.A. to the purchaser, Avio Holding S.p.A., should FiatPartecipazioni S.p.A. fail to pay the compensation (following either an arbitral award or an out-of-court settlement) provided for bythe sales agreement signed with the seller in 2003. Similarly, in connection with the sale of the controlling interest in the railwaybusiness, Fiat S.p.A. is liable to the purchaser, Alstom N.V., for any failure of the company that sold the business (now FiatPartecipazioni S.p.A.) to comply with the contractual compensation obligations.

CommitmentsCommitments total 4,648 thousand euros at year end, a decrease of 2,324 thousand euros over December 31, 2005. The balancerepresents the residual amount of the commitment undertaken by Fiat S.p.A. on its centenary, in a resolution adopted bystockholders in their meeting of June 22, 1998, to make a contribution to the costs of providing degree courses in AutomotiveEngineering and of renovating the related university building over a ten-year period.


Exchange rate riskAt December 31, 2006 Fiat S.p.A. has no significant receivables or payables balances or derivative financial instruments exposedto exchange rate risk.

Interest rate riskFiat S.p.A. satisfies its financial requirements through the Group’s centralised treasury management system.

In particular:

n non-current financial payables consist of fixed rate loans granted by Fiat Finance S.p.A. (as discussed in Note 22). The changein the fair value of these loans resulting from a hypothetical, instantaneous and unfavourable change of 10% in market interestrates would have been approximately 51 million euros;

n current financial payables consist mostly of current account overdrafts with Fiat Finance S.p.A., a fixed rate loan from FiatFinance S.p.A. and payables for advances received from counterparty banks on the sale of receivables (as discussed in Note 26).In regard to those financial payables and their refinancing, a hypothetical, instantaneous and unfavourable change of 10% in short-term interest rate levels would have led to an increase in pre-tax expenses on an annual basis of approximately 5 millioneuros.

Other risks relating to derivative financial instrumentsAs discussed in Note 8, Fiat S.p.A. holds certain derivative financial instruments whose value is linked to the trends in the priceof listed shares (they are essentially equity swaps on Fiat shares). Although these transactions were entered into for hedgingpurposes, they do not always qualify for hedge accounting under IFRS. As a result, fluctuations in their value could affect thecompany’s results.

The potential loss in fair value of derivative financial instruments held by the company at December 31, 2006, linked to changesin the price of listed shares, which would arise in the case of a hypothetical, instantaneous and unfavourable change of 10% inthe underlying values, amounts to approximately 40 million euros (8 million euros at December 31, 2005). The increase over thefigure at December 31, 2005 is the result of new transactions entered during the year and the increase in the market price of theunderlying Fiat share.

30. Intercompany and related party transactionsRelated party transactions for Fiat S.p.A. consist for the most part of transactions carried out with the company’s directly andindirectly held subsidiaries, carried out at market conditions that are normal in the respective markets taking into account thecharacteristics of the goods and the services involved.

The effects of these transactions on the single items of the 2006 financial statements, which may also be found in thesupplementary financial statements and in the explanatory notes, is summarised in the following tables:

Credit riskThe maximum credit risk to which Fiat S.p.A. is theoretically exposed at December 31, 2006 is represented by the carrying amountsstated for financial assets in the Balance Sheet and the nominal value of the guarantees provided as discussed in Note 28.

Amounts receivable at the Balance Sheet date are essentially due from Group companies, from the tax authorities and from T.A.V.S.p.A. The risk on receivables from this latter company is limited to the margin earned by Fiat S.p.A. (of approximately 3.6%), sincea condition for the settlement of payables to consortium companies is the receipt of the amounts due from TAV S.p.A.

Guarantees given are for the most part on behalf of Group companies.

There are no significant overdue balances.

Liquidity riskLiquidity risk arises if the company is unable to obtain under economic conditions the funds needed to carry out its operations.

Fiat S.p.A. takes part in the Group’s centralised treasury management and as a result the liquidity risks to which it is exposed arestrictly connected with those to which the Fiat Group is exposed as a whole.

The two main factors that determine the Group’s liquidity situation are on one side the funds generated by or used in operatingand investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employedand market terms and conditions.

The Group has adopted a series of policies and procedures whose purpose is to optimise the management of funds and to reducethe liquidity risk, as follows:

n centralising the management of receipts and payments, where it may be economical in the context of the local civil, currencyand fiscal regulations of the countries in which the Group is present;

n maintaining an adequate level of available liquidity;

n diversifying the means by which funds are obtained and maintaining a continuous and active presence on the capital markets;

n obtaining adequate credit lines; and

n monitoring future liquidity on the basis of business planning.

Management believes that the funds and credit lines currently available, in addition to those funds that will be generated fromoperating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activities and itsworking capital needs and to fulfil its obligations to repay its debts at their natural due date.


Counterparty Other operating Other operating Financial income(in thousands of euros) income costs (expenses)

Banco CNH Capital S.A. – – 375 Business Solutions S.p.A. 1,323 – –CNH Global N.V. – – 889 Comau S.p.A. 1,154 – –C.R.F. S.c.p.A. 345 – –Editrice La Stampa S.p.A. 335 – –Elasis S.c.p.A. 345 – –eSPIN S.p.A. – 1,932 –Ferrari S.p.A. – 2,066 –Fiat Auto S.p.A. 12,881 7,524 122Fiat Automoveis S.A. - FIASA 5,609 – 567Fiat Finance S.p.A. – 630 (89,572)Fiat Finance and Trade Ltd. – – 1,929 Fiat France S.A. – 1,734 –Fiat Gesco S.p.A. – 3,948 –Fiat Inf. & Comm. Services S.c.p.A. 85 4,287 –Fiat Partecipazioni S.p.A. 223 206 –Fiat Powertrain Technologies S.p.A. 1,583 – –Fiat-Revisione Interna S.c.r.l. – 13,704 –Fiat Servizi per l’Industria S.c.p.A. – 3,184 –Fidis S.p.A. 387 – –Ingest Facility S.p.A. 2,178 3,770 –Intermap (Nederland) B.V. – – 67,263 Isvor Fiat S.c.p.A. 443 117 –Itedi S.p.A. 387 – –Iveco S.p.A. 2,411 – –KeyG Consulting S.p.A. – 511 –Magneti Marelli Holding S.p.A. 1,745 – –MC2 - Media Communications S.p.A. 233 17 –Orione S.c.p.A. – 3,478 –Publikompass S.p.A. 480 24 –Servizio Titoli S.p.A. – 1,237 –Sirio S.c.p.A. – 1,132 –Teksid S.p.A. 967 – –Other Group companies 86 1,139 662 Total Group companies 33,200 50,640 (17,765)Other related parties – 1,261 –Total Group companies and other related parties 33,200 51,901 (17,765)Total line item 79,238 141,006 (24,847)Percentage of line item 42% 37% 71%

Counterparty Other Current Other Non-curr. Current fin. Trade fin. current fin. Trade fin. Other

(in thousands of euros) assets recs. recs. recs. pays. pays. pays. pays.

eSPIN S.p.A. – – – – – 165 – –Ferrari S.p.A. – – – – – 2,479 – –Fiat Auto S.p.A. – 343 – 37 – 9,073 – 34 Fiat Automoveis S.A. – FIASA – 1,240 – – – – – –Fiat Finance S.p.A. – – 33 – 2,800,000 – 1,399,095 –Fiat France S.A. – – – – – 2,074 – –Fiat Gesco S.p.A. – – – – – 325 – –Fiat Inf. & Comm. Services S.c.p.A. – – – – – 2,165 – –Fiat Powertrain Technologies S.p.A. – 630 – – – – – –Fiat Servizi per l’Industria S.c.p.A. – – – – – – – 3,177 Ingest Facility S.p.A. – – – – – 464 – –Intermap (Nederland) B.V. – – 84,140 – – – 6,459 –KeyG Consulting S.p.A. – – – – – 115 – –Orione S.c.p.A. – – – – – 296 – –Sirio S.c.p.A. – – – – – 101 – –RES tax consolidation – – – 146,847 – – – 154,910 VAT consolidation – – – – – – – 160,957 Financial guarantee contracts 10,029 – – – 10,029 – – –Other Group companies – 195 – 24 – 289 – –Total Group companies 10,029 2,408 84,173 146,908 2,810,029 17,546 1,405,554 319,078Other related parties – – – – – 255 – –Total Group companies and other related parties 10,029 2,408 84,173 146,908 2,810,029 17,801 1,405,554 319,078Total line item 20,134 154,692 84,173 626,428 2,810,029 184,661 1,627,430 361,247Percentage of line item 50% 2% 100% 23% 100% 10% 86% 88%

Items arising from the national tax consolidation (see Notes 18 and 27) and from the consolidated VAT settlement procedure(see Note 27) are reported in the above table in the aggregate, as these do not represent actual trading between Group companiesand are carried out solely as part of the financial procedure permitted by tax laws and regulations governing the relations of ItalianGroup companies with the tax revenue authorities. In a similar manner the asset and liability balances (each of the same amount)relating to the valuation of financial guarantee contracts (see Notes 14 and 22) have also not been reported by individualcounterparty as they are not material, being only representative of the present value of the estimated commissions to be earnedin future years.


Financial flows from relations with related parties are not presented in a specific table as these also regard almost entirelythe transactions with directly or indirectly held subsidiaries discussed earlier.

Transactions with related parties as defined by IAS 24 which did not involve directly or indirectly held subsidiaries were as follows:

n professional and advisory services and services as the secretary of the Board of Directors and of the Committees were providedto Fiat S.p.A. by Franzo Grande Stevens for fees of 1,136 thousand euros;

n directors’ fees of 77 thousand euros and 48 thousand euros were recharged to Istituto Finanziario Industriale S.p.A. and IFILInvestments S.p.A. respectively;

n Ferrari S.p.A. increased its capital stock in 2006 by issuing a total of 104,000 new shares at a price of 175 euros each, followingthe exercising by the company’s chairman, Luca Cordero di Montezemolo, of the same number of stock options. Notice of thisdecision was provided in advance to the Board of Fiat S.p.A. at its meeting on 28 February and the options were effectivelyexercised on 12 May for 88,400 options and on 8 June for the remaining 15,600 options. Fiat S.p.A. purchased a total of 93,600shares from Mr. Montezemolo at a price of 285 euros each, which was the same price as that the one agreed upon betweenMediobanca S.p.A. and Mubadala Development Company on the occasion of the recent sale. The total investment amountedto 26,713 thousand euros.

31. Net financial positionPursuant to the Consob Communication of July 28, 2006 and in compliance with the CESR’s recommendations for the consistentimplementation of the European Commission’s Regulation on Prospectuses issued on February 10, 2005, the net financial positionof Fiat S.p.A. at December 31, 2006 is as follows:

(in thousands of euros) At 31 December 2006 At 31 December 2005 Change

Cash and cash equivalents 608 495 113Current financial receivables: 84,173 3,075,894 (2,991,721)- from Group companies 84,173 3,075,894 (2,991,721)- from Third parties – – –Non-current financial payables: (2,810,029) (5,262) (2,804,767)- due to Group companies (2,810,029) (5,262) (2,804,767)- due to Third parties – – –Current financial payables: (1,627,430) (557,383) (1,070,047)- due to Group companies (1,405,554) (434) (1,405,120)- due to Third parties (221,876) (556,949) 335,073Net financial position (4,352,678) 2,513,744 (6,866,422)- due to Group companies (4,131,410) 3,070,198 (7,201,608)- due to Third parties (221,268) (556,454) 335,186

Details of the more significant transactions between Fiat S.p.A. and Group companies summarised in the above tableare as follows:

n granting of a licence to use the Fiat trademark to Fiat Auto S.p.A. and Fiat Automoveis S.A.– FIASA for a consideration calculatedas a percentage of turnover;

n services provided by executives of Fiat S.p.A. to the main Group companies (Fiat Auto S.p.A., Comau S.p.A., Business SolutionsS.p.A., Iveco S.p.A., Teksid S.p.A., Magneti Marelli Holding S.p.A., Fiat Powertrain Technologies S.p.A. and other minor);

n lease of property to Ingest Facility S.p.A. and Fiat Information & Communication Services S.c.p.A. and the recovery of directors’fees and expenses;

n provision of sureties and personal guarantees (see Note 28) on the issues of bonds and Billets de Trésorerie (mainly Fiat Financeand Trade Ltd.), bank loans (Fiat Automoveis S.A., Fiat Finance S.p.A. and other minor), property rental payments (Fiat Auto S.p.A.and its subsidiaries) and credit facilities guaranteed or made available (CNH Global N.V.);

n management of current accounts, granting of loans, obtaining of short- and medium-term loans and financial assistance(Fiat Finance S.p.A.);

n management of derivative financial instruments (Intermap - Nederland B.V. and Fiat Finance S.p.A., see Notes 17 and 26);

n purchases of administrative, tax and corporate assistance and consultancy services (Fiat Gesco S.p.A., Servizio Titoli S.p.A.and KeyG Consulting S.p.A.), public relations services (Fiat Information & Communications Services S.c.p.A.), office space services,maintenance and real estate services (Ingest Facility S.p.A. and Fiat Partecipazioni S.p.A.), personnel and other managementservices (Fiat Servizi per l’Industria S.c.p.A.), ICT services (eSPIN S.p.A.), security services (Orione S.c.p.A and Sirio S.c.p.A.),sponsorship, advertising and promotional activities (Ferrari S.p.A. and Fiat France S.A.) and supervisory and internal audit services(Fiat Revisione Interna S.c.r.l.);

n contributions to expenses for activities supporting the trademark and image of the Group (Fiat Auto S.p.A.).

Intercompany transactions in 2006 also include the management of investments which entailed the following:

n collection of dividends from subsidiaries (see Note 1);

n subscription of capital increases of directly held subsidiaries (see Note 13);

n acquisition of 60.56% of the capital of Iveco S.p.A. from Fiat Netherlands Holding N.V., as reported in Note 13;

n as part of the corporate restructuring of the consortium companies of the Group, Fiat S.p.A., acquisition of the direct controlof Fiat Revi S.c.p.A. by purchasing the investments previously held by Fiat Partecipazioni S.p.A. and Fiat Auto S.p.A. In addition,Fiat S.p.A. sold its minority interest in Fiat Sepin S.c.p.A. to Fiat Partecipazioni S.p.A.


List of investments in subsidiaries and associated companies with additional information required by Consob(communication no. DEM/6064293 of July 28, 2006)

n SubsidiariesResult for the Stockholders’

Capital last fiscal year equity % owned by Accounting valueCompany and registered office (in euros) (in euros) (in euros) Fiat S.p.A. Number of shares (in euros)

Fiat Partecipazioni S.p.A. – TurinAt 12/31/05 3,924,685,869 (862,234,014) 306,158,302 100.00 3,924,685,869 580,792,082n reduction of capital stock through cancellation of shares (3,618,527,567)n capital contribution 6,000,000,000n reversal of impairment loss 1,388,000,000At 12/31/06 306,158,302 942,776,463 7,248,934,765 100.00 306,158,302 7,968,792,082Fiat Netherlands Holding N.V. – Amsterdam (Netherlands)At 12/31/05 4,366,482,748 207,060,528 4,255,797,815 60.56 57,488,376 2,725,682,656n capital contribution 121,125,650n transfer of investment in Iveco S.p.A. to stockholders (647,475,682)n reversal of impairment loss 95,536,000At 12/31/06 2,610,397,295 937,119,160 3,361,946,033 60.56 57,488,376 2,294,868,624

+39.44 ind.Iveco S.p.A. – TurinAt 12/31/05 – – –n transfer from Fiat Netherlands Holding N.V. to stockholders 519,871,290 647,475,682n restoration of carrying amount 945,814,000At 12/31/06 858,400,000 141,459,227 819,519,720 60.56 519,871,290 1,593,289,682

+39.44 ind.Ferrari S.p.A. – Modena At 12/31/05 20,000,000 52,962,628 218,805,827 56.00 4,480,000 160,675,480n purchases 2,413,600 896,012,409n sale (5,200) (1,484,066)At 12/31/06 20,260,000 94,470,228 331,476,056 85.00 6,888,400 1,055,203,823Magneti Marelli Holding S.p.A. – CorbettaAt 12/31/05 254,324,998 (64,320,893) 548,153,279 99.99 254,301,607 811,153,400

Ordinary sharesAt 12/31/05 100.00 250,500,601 799,002,413At 12/31/06 100.00 250,500,601 799,002,413Preference sharesAt 12/31/05 99.39 3,801,006 12,150,987At 12/31/06 99.39 3,801,006 12,150,987

At 12/31/06 254,324,998 (42,698,723) 505,454,556 99.99 254,301,607 811,153,400Teksid S.p.A. – TurinAt 12/31/05 145,817,739 (43,497,815) 102,319,924 84.79 123,640,010 75,851,000At 12/31/06 145,817,739 (30,916,663) 71,403,261 84.79 123,640,010 75,851,000Comau S.p.A. – GrugliascoAt 12/31/05 140,000,000 (55,231,582) 156,954,825 100.00 140,000,000 140,613,200n reduction of capital stock (85,516,556)n capital stock increase 45,516,556n capital contribution 240,000,000n impairment loss (330,000,000)At 12/31/06 100,000,000 (348,940,866) 48,013,959 100.00 100,000,000 50,613,200Business Solutions S.p.A. – TurinAt 12/31/05 10,000,000 (31,547,213) 4,791,396 100.00 10,000,000 36,304,200At 12/31/06 4,791,396 18,086,645 22,878,041 100.00 10,000,000 36,304,200Itedi - Italiana Edizioni S.p.A. – Turin At 12/31/05 5,980,000 1,919,935 40,354,885 100.00 5,980,000 25,899,105At 12/31/06 5,980,000 8,694,788 37,049,673 100.00 5,980,000 25,899,105

32. Significant non-recurring transactionsPursuant to the Consob Communication of July 28, 2006, the only significant non-recurring transaction carried out by Fiat S.p.A.in 2006 was the purchase of 28.6% of the shares of Ferrari S.p.A.. The effects of this transaction are discussed in Note 13.

33. Transactions resulting from unusual and/or abnormal operationsPursuant to the Consob Communication of July 28, 2006, Fiat S.p.A. has not taken part in any unusual and/or abnormal operationsas defined in that Communication, under which unusual and abnormal transactions are those which because of their significanceor importance, the nature of the parties involved, the object of the transaction, the means of determining the transfer price or thetiming of the event (close to the year end) may give rise to doubts regarding the accuracy/completeness of the information in thefinancial statements, conflicts of interest, the safeguarding of an entity’s assets or the protection of minority interests.

34. Subsequent EventsAs reported in Note 20, following the exercise of 4,676 “Fiat Ordinary Share Warrants 2007” (issued on the occasion of the capitalincrease on December 10, 2001), 1,169 shares (nominal value 5 euros each) were issued on February 1, 2007 at a price of 34,326.51euros. The subscribed and paid-in capital of Fiat S.p.A. consequently increased by 5,845 euros from 6,377,257,292,130 euros to6,377,262,975 euros. The difference of 28,481.51 euros was allocated to Additional paid-in capital. The remaining warrants haveexpired and have accordingly been cancelled.

Following the contribution of the shares in Magneti Marelli Holding S.p.A. and Teksid S.p.A. by Fiat S.p.A., the stockholders of FiatPartecipazioni S.p.A. resolved in an extraordinary meeting on February 9, 2007 in favour of a capital increase of 1,002 million euros(consisting of an increase in capital stock of 50 million euros and additional paid-in capital of 952 million euros), through theissuance of shares to be assigned to the contributing stockholder Fiat S.p.A.. The transaction was carried out as part of theprogramme to streamline and simplify the Group’s corporate structure, in which Fiat Partecipazioni S.p.A. is assigned the roleof parent company for the principal Italian industrial sectors.


List of investments in subsidiaries and associated companies with additional information required by Consob (communication no. DEM/6064293 of July 28, 2006)

n Other companiesAccounting value

Company and registered office % owned by Fiat S.p.A. Number of shares (in euros)

Mediobanca S.p.A. – MilanAt 12/31/05 1.77 14,118,350 227,107,778n transfer from Consortium S.r.l. to stockholders 884,857 13,544,506n adjustment to fair value 27,605,057At 12/31/06 1.84 15,003,207 268,257,341Assicurazioni Generali S.p.A. – TriesteAt 12/31/05n transfer from Consortium S.r.l. to stockholders 164,083 4,566,922n adjustment to fair value 892,119At 12/31/06 0.01 164,083 5,459,041Fin.Priv. S.r.l. – MilanAt 12/31/05 14.29 14,354,662At 12/31/06 14.29 14,354,662Consortium S.r.l. – MilanAt 12/31/05 2.76 19,529,683n reduction of capital stock and reserves and refund to stockholders (19,243,420)At 12/31/06 2.76 286,263Consorzio Lingotto – TurinAt 12/31/05 5.40 279At 12/31/06 5.40 279n Total other companies 288,357,586

% owned by Fiat S.p.A.The indirect percentage held in the ordinary capital of subsidiaries is also indicated.

List of investments (continued)Result for the Stockholders’

Capital last fiscal year equity % owned by Accounting valueCompany and registered office (in euros) (in euros) (in euros) Fiat S.p.A. Number of shares (in euros)

IHF - Internazionale Holding Fiat S.A. – Lugano (Switzerland) At 12/31/05 64,304,546 109,326,187 353,318,843 100.00 100,000 33,444,877

CHF 100,000,000 170,013,153 549,446,133At 12/31/06 62,231,626 272,335,448 360,981,993 100.00 100,000 33,444,877

CHF 100,000,000 437,615,831 580,061,965Fiat Finance S.p.A. – Turin At 12/31/05 224,440,000 21,035,715 312,118,679 100.00 224,440,000 222,262,897At 12/31/06 224,440,000 85,039,496 322,158,175 100.00 224,440,000 222,262,897Fiat Finance North America Inc. – Wilmington (U.S.A.)At 12/31/05 33,983,225 971,635 39,411,080 39.47 150 15,557,000

USD 40,090,010 1,146,238 46,493,251At 12/31/06 30,440,402 1,355,068 36,657,462 39.47 150 15,557,000

USD 40,090,010 1,784,625 48,277,877 +60.53 ind.Fiat U.S.A. Inc. – New York (U.S.A.)At 12/31/05 14,266,339 421,594 27,255,517 100.00 1,000 27,257,726

USD 16,830,000 497,355 32,153,333At 12/31/06 12,779,043 601,656 25,015,728 100.00 1,000 27,257,726

USD 16,830,000 792,381 32,945,714Elasis-Società Consortile per Azioni – Pomigliano d’Arco At 12/31/05 20,000,000 29,905 20,134,672 0.17 33,334 29,974At 12/31/06 20,000,000 736,816 20,871,489 0.17 33,334 29,974

+99.83 ind.Fiat Information & CommunicationServices società consortile per Azioni – TurinAt 12/31/05 800,000 26,635 955,257 51.00 408,000 430,000At 12/31/06 800,000 (75,141) 880,116 51.00 408,000 430,000

+49.00 ind. MC2 - Media Communications S.p.A. – TurinAt 12/31/05 219,757 1,210 220,967 3.17 6,977 5,165n sale (6,977) (5,165)At 12/31/06 – – –Fiat-Revisione Interna S.c.r.l. – Turin At 12/31/05 300,000 55,930 389,238 14.00 42,000 n.v. 42,962n purchase 111,000 n.v. 144,018At 12/31/06 300,000 11,525 400,763 51.00 153,000 n.v. 186,980

+49.00 ind.Fiat Servizi per l’Industria S.c.p.A. – TurinAt 12/31/05 1,652,669 349,291 2,001,960 36.47 602,688 515,803n sale (520,055) (445,083)At 12/31/06 1,652,669 (465,973) 1,535,987 5.00 82,633 70,720

+95.00 ind.Isvor Fiat Società consortile di sviluppo e addestramento Industriale per Azioni – Turin At 12/31/05 300,000 175,142 715,087 26.00 78,000 –n sale (69,000) –At 12/31/06 300,000 133,185 848,273 3.00 9,000 –

+97.00 ind.Orione S.c.p.A.-Società Industriale per la Sicurezza e la Vigilanza Consortile per Azioni – TurinAt 12/31/05 26,605 60,906 87,511 81.20 21,108n transformation into a consortium stock corporation 21,603At 12/31/06 120,000 42,912 223,818 18.00 21,603 21,108

+81.12 ind.SIRIO - Sicurezza Industriale Società consortile per Azioni – TurinAt 12/31/05 120,000 14,974 197,826 0.75 901 764At 12/31/06 120,000 16,490 229,062 0.75 901 764

+ 92.27 ind.n Total subsidiaries 14,211,237,162


Stock Options granted Members of the Board of Directors, General Managers and Executives with StrategicResponsibilities (Article 78 of Consob Regulation No. 11971/99)

OptionsOptions held at the Options granted Options exercised expired in Options held

Grantee beginning of the year during the year during the year the year at the end of the year

Averagemarket

Office held at Number Average Exercise Number Average Exercise Number Average price Number Number Average ExerciseFirst name and the date of the of exercise period of exercise period of exercise at exercise of of exercise periodlast name grant options price (mm/yy) options price (mm/yy) options price date options options price (mm/yy)

Paolo Fresco Chairman 2,250,000 20.614 07/01-01/10 2,250,000 20.614 07/01-01/10

Sergio Marchionne Chief Executive

Officer 10,670,000 6.583 06/08-01/11* 10,670,000 6.583 06/08-01/11

Executives

with strategic

responsibilities 801,000 18.572 02/01-09/10 40,000 10.397 14.14 192,600 568,400 17.703 02/01-09/10

* The options are exercisable for one-third of the shares only upon satisfaction of the profitability targets, whose amount and reference period are defined in advance.

As indicated in Note 20, on November 3, 2006 the Fiat S.p.A. Board of Directors approved a stock option plan, which provides morethan 300 managers, including executives with strategic responsibilities, and the Chief Executive Officer with the right to purchase10,000,000 Fiat S.p.A. ordinary shares at the fixed price of 13.37 euros per share. In particular, the options granted to the managersand no. 5,000,000 options granted to the Chief Executive Officer have a vesting period of four years, with a quarter of the numbervesting each year, are subject to achieving certain pre-determined profitability targets in the reference period and may beexercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options also have a vestingperiod of four years with a quarter of the number vesting each year and may be exercised from November 2010. Furthermore theability to exercise the options is additionally subject to specific restrictions regarding the duration of the mandate given.

The stock option plan will become effective after approval by the Stockholders Meeting and once all its conditions have beensatisfied.




Fees paid to Members of the Board of Directors and Control Bodies, General Managers and Executives with StrategicResponsibilities (in thousands of euros) (Article 78 of Consob Regulation No. 11971/99)

Term Compensation Non-cash Bonuses and OtherFirst name and last name Office held in 2006 of office Expiration (*) for office held benefits (**) other incentives fees TotalLuca Cordero di Montezemolo Director 01/01-12/31/2006 2009 550.0 9.1 1,000.0 5,484.0 7,043.1

Chairman 1) 2)

John Elkann Director 01/01-12/31/2006 550.0 24.5 574.5Vice Chairman 2009 3)

Sergio Marchionne Chief Executive Officer 01/01-12/31/2006 2009 2,000.0 4,228.0 368.8 6,596.84) 5)

Andrea Agnelli Director 01/01-12/31/2006 2009 77.0 77.0Roland Berger Director 05/03-12/31/2006 2009 48.3 48.3Tiberto Brandolini d’Adda Director 01/01-12/31/2006 2009 77.0 77.0Luca Garavoglia Director 01/01-12/31/2006 2009 92.0 92.0Gian Maria Gros-Pietro Director 01/01-12/31/2006 2009 92.0 92.0Hermann-Josef Lamberti Director 01/01-12/31/2006 2009 92.0 92.0Virgilio Marrone Director 01/01-12/31/2006 2009 77.0 77.0

6)

Vittorio Mincato Director 01/01-12/31/2006 2009 89.0 89.0Pasquale Pistorio Director 01/01-12/31/2006 2009 80.0 80.0Carlo Sant’Albano Director 05/03-12/31/2006 2009 48.3 48.3

7)

Ratan Tata Director 05/03-12/31/2006 2009 39.3 39.3Mario Zibetti Director 01/01-12/31/2006 2009 101.0 101.0Angelo Benessia Director 01/01-05/03/2006 40.8 40.8Flavio Cotti Director 01/01-05/03/2006 34.8 34.8John Daniel Winteler Director 01/01-05/03/2006 31.8 31.8Carlo Pasteris Chairman of the Board 05/03-12/31/2006 2009 41.9 3.0 44.9

of Statutory Auditors 8)

Giuseppe Camosci Statutory Auditor 01/01-12/31/2006 2009 42.0 42.0Cesare Ferrero Chairman of the Board 01/01-05/03/2006 49.1 40.0 89.1

of Statutory Auditors 9)

Statutory Auditor 05/03-12/31/2006 2009Giorgio Ferrino Statutory Auditor 01/01-05/03/2006 14.1 14.1Executives with strategic 0.0 119.0 6,667.0 11,876.0 18,662.0responsibilities (***) 10) 11) 12) 13)

(*) Year in which the Stockholders Meeting is convened for approval of the Annual Report, coinciding with expiration of the term of office.(**) They include the use of means of transport for personal purposes.(***) It includes 17 executives.1) The gross annual compensation for the office of Chairman amounts to 500,000 euros. 2) Compensation for office held in Ferrari, including variable compensation. Starting from the fourth year of office as Chairman of Ferrari, he will accrue the right to receive the following

severance package: a sum payable over twenty years, the amount of which, after ten years, may not be greater than five times the fixed portion of his annual compensation. The relevantaccrual posted by Ferrari in 2006 amounted to 593.3 thousand euros.

3) The gross annual compensation for the office of Vice Chairman amounts to 500,000 euros.4) Variable compensation whose payment is subject to the achievement of predetermined targets related to the annual budget and which may not be greater than 2.5 times the gross annual

fixed compensation.5) The amount includes compensation for office held in the subsidiaries IHF and BUC (368.8 thousand euros) but does not include compensation for the office held in Fiat Auto (500 thousand

euros), which he does not receive but is channelled to Fiat S.p.A. In 2006, the Company posted an accrual of 771 thousand euros for the Chief Executive Officer’s severance package.6) Compensation channelled to IFI S.p.A.7) Compensation channelled to IFIL Investments S.p.A.8) Compensation for the office of Common representative of holders of savings shares, held until April 20, 2006.9) Compensation for the office of Chairman of the Board of Statutory Auditors of Fiat Auto S.p.A.10) Including fringe benefits.11) Variable portion of the compensation.12) Including compensation for employment work, amounts paid upon termination of employment (3,318.0 thousand euros), and compensation not channelled for offices held at subsidiaries.13) Social contributions paid by the company are not included.

in 2005 regarding the recognition and measurement offinancial guarantee contracts in the financial statementsof the guarantor and having effect from January 1, 2006has been applied.

First-time adoption of IFRS

General principleIn compliance with IFRS 1, Fiat S.p.A. has applied theaccounting standards effective at the reporting date of itsfirst IFRS financial statements to its opening Balance Sheetat January 1, 2005 and retrospectively throughout all theperiods presented in those statements, except for theexemptions permitted by IFRS 1 and elected by the companyas described in the following. In particular, as Fiat S.p.A. hasadopted IFRS for its separate financial statements at a laterdate than for its consolidated financial statements (in whichthere was an opening IFRS Balance Sheet at January 1, 2004),it has measured assets and liabilities in accordance with IFRSat the same value in both Balance Sheets (separate andconsolidated), with the exception of the items for which thereare consolidating adjustments.

There are the following differences in the opening BalanceSheet at January 1, 2005 compared to that included in thefinancial statements for the year ended December 31, 2004prepared in accordance with Italian accounting principles:

n all assets and liabilities whose recognition is required byIFRS, including those not permitted in the application of Italianaccounting principles, have been recognised and measuredin accordance with IFRS;

n all assets and liabilities whose recognition is requiredby Italian accounting principles but is not permitted by IFRShave been derecognised;

n certain Balance Sheet items have been reclassifiedin accordance with IFRS.

The effects of these adjustments have been recognised directlyin opening equity at January 1, 2005, the date of first-timeadoption of IFRS.

In compliance with European Regulation no. 1606 of July 19,2002, starting from 2005 the Fiat Group has adopted theInternational Financial Reporting Standards (“IFRS”) issuedby the International Accounting Standards Board (“IASB”) forthe preparation of its consolidated financial statements. On thebasis of national legislation implementing that Regulation, theannual statutory accounts of the Parent Company Fiat S.p.A.at December 31, 2006 have also been prepared using thoseaccounting standards. As a consequence the Parent CompanyFiat S.p.A. is presenting its financial statements for 2006 and itscomparative figures for the prior year in accordance with IFRS.

This Appendix provides reconciliations of the company’sBalance Sheets at January 1, 2005 and December 31, 2005 andits Income Statement for the year ended December 31, 2005,together with notes, as required by IAS 1 – Presentation ofFinancial Statements.

This information has been prepared as part of the transition byFiat S.p.A. to IFRS and in connection with the preparation of itsstatutory accounts for the year ending December 31, 2006 inaccordance with IFRS; it does not include all of the disclosureswhich would be necessary for a full presentation of the financialposition and results of operations of Fiat S.p.A. as of and forthe year ended December 31, 2005 in conformity with IFRS.

Reconciliations required by IFRS 1As required by IFRS 1 – First-time Adoption of InternationalFinancial Reporting Standards, this Appendix describes theprinciples adopted in preparing the opening Balance Sheetat January 1, 2005 in accordance with IFRS and the maindifferences with the Italian accounting principles used toprepare the Italian financial statements for the year endedDecember 31, 2005, and provides reconciliations between thefigures already published, prepared in accordance with Italianaccounting principles, and the corresponding figuresredetermined in accordance with IFRS.

The Balance Sheet and Income Statement for the year endedDecember 31, 2005 have been prepared in accordance withthe provisions of IFRS 1 on the basis of the IFRS alreadyeffective from January 1, 2006 as published at December 31,2005. As a result in particular the amendment to IAS 39 issued

Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS) 301

AppendixTransition of the Parent Company Fiat S.p.A. toInternational Financial Reporting Standards (IFRS)

Financial statement formatFiat S.p.A. has adopted the current/non-current distinction forthe presentation of assets and liabilities in its Balance Sheet,leading to the need to reclassify the previous Balance Sheetspresented in accordance with the formats required byLegislative Decree no. 127 of April 9, 1991 and subsequentmodifications; the presentation of the Income Statementremains unchanged, with expenses classified on the basisof their nature.

Optional exemptions elected by Fiat S.p.AIn accordance with the optional exemption granted by IFRS 1,Fiat S.p.A. has elected to measure its assets and liabilities atJanuary 1, 2005, the transition date, at the same amounts usedin the preparation of the Group’s consolidated financialstatements for the year ended December 31, 2004.In further detail:

n Employee benefits: the Fiat Group elected to recogniseall cumulative actuarial gains and losses at January 1, 2004on transition to IFRS, even though it decided to use the“corridor approach” for later actuarial gains and losses.This exemption was applied from January 1, 2004, the dateof first-time adoption of IFRS by the Fiat Group. There wouldnot have been material differences if this had instead beenapplied from January 1, 2005.

n Business combinations: Fiat S.p.A. has elected not to applyIFRS 3 – Business Combinations to business combinationsthat occurred before the date of transition to IFRS.


Effects of transition to IFRS on the Balance Sheet at January 1, 2005(in millions of euros) Italian GAAP Reclassifications Adjustments IAS/IFRS

Intangible assets 50 – (50) – Intangible assetsProperty, plant and equipment 43 (1) – 42 Property, plant and equipmentEquity investments 5,249 – 75 5,324 InvestmentsOther securities – – 7 7 Other financial assets

277 – 277 Deferred tax assets2 – 2 Other non-current assets

Total fixed assets 5,342 278 32 5,652 Total Non-current assetsInventories 7,145 (7,321) 176 – InventoriesTrade receivables 351 6 – 357 Trade receivablesReceivables from subsidiaries 25 (25) –Financial receivables from subsidiaries 2,321 2 – 2,323 Current financial receivablesTaxes receivable 289 (289) –Deferred tax assets 277 (277) –Other receivables 33 312 359 704 Other current receivablesTreasury stock 26 – (26)Cash on hand – – – – Cash and cash equivalentsTotal current assets 10,467 (7,592) 509 3,384 Total Current AssetsAccrued income and prepaid expenses 7 (7) –

– – – Assets held for saleTOTAL ASSETS 15,816 (7,321) 541 9,036 TOTAL ASSETS

Total stockholders’ equity 4,466 – 190 4,656 Total stockholders’ equityProvisions for termination indemnities Provisions for employee and similar obligations 19 36 (3) 52 benefits and other non-current provisionsOther provisions 30 (30) –

– – – Deferred tax liabilities– 7 7 Non-current debt

13 – 13 Other non-current liabilitiesTotal provisions for risks and charges 49 19 4 72 Total Non-current liabilitiesProvision for employee severance indemnities 12 (12) –

Provisions for employees and 6 – 6 other current provisions

Trade payables 502 11 – 513 Trade payablesPayable to subsidiaries 223 (223) –Borrowings from banks 3,060 137 347 3,544 Current debtAdvances 7,336 (7,336) –Payables to social security authorities 3 (3) –Other payables 26 219 – 245 Other payablesTaxes payable 9 (9) –Total payables 11,159 (7,198) 347 4,308 Total Current LiabilitiesAccrued expenses and deferred income 130 (130) –

– – – Liabilities held for saleTOTAL STOCKHOLDERS’ EQUITY AND LIABILITIES 15,816 (7,321) 541 9,036 TOTAL STOCKHOLDERS’

EQUITY AND LIABILITIES

Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS)

Effects of transition to IFRS on the Balance Sheet at December 31, 2005(in millions of euros) Italian GAAP Reclassifications Adjustments IAS/IFRS

Intangible assets 28 – (28) – Intangible assetsProperty, plant and equipment 41 (1) – 40 Property, plant and equipmentEquity investments 4,983 – 135 5,118 InvestmentsOther securities – 5 5 Other financial assets

– – – Deferred tax assets5 – 5 Other non-current assets

Total fixed assets 5,052 4 112 5,168 Total Non-current assetsInventories 8,431 (8,635) 204 – InventoriesTrade receivables 208 8 – 216 Trade receivablesReceivables from subsidiaries 113 (113) –Financial receivables from subsidiaries 3,059 9 8 3,076 Current financial receivablesTaxes receivable 103 (103) –Deferred tax assets – – –Other receivables 35 208 557 800 Other current receivablesTreasury stock 28 – (28)Cash on hand – – – – Cash and cash equivalentsTotal current assets 11,977 (8,626) 741 4,092 Total Current AssetsAccrued income and prepaid expenses 13 (13) –

– – – Assets held for saleTOTAL ASSETS 17,042 (8,635) 853 9,260 TOTAL ASSETS

Total stockholders’ equity 7,689 – 296 7,985 Total stockholders’ equityProvisions for termination indemnities and Provisions for employee benefits similar obligations 22 12 (5) 29 and other non-current provisionsOther provisions 31 (31) –

– – – Deferred tax liabilities– 5 5 Non-current debt

17 – 17 Other non-current liabilitiesTotal provisions for risks and charges 53 (2) – 51 Total Non-current liabilitiesProvision for employee severance indemnities 12 (12) –

Provisions for employees and 31 – 31 other current provisions

Trade payables 380 5 – 385 Trade payablesPayable to subsidiaries 223 (223) –Borrowings from banks – – 557 557 Current debtAdvances 8,657 (8,657) –Payables to social security authorities 2 (2) –Other payables 23 228 – 251 Other payablesTaxes payable 3 (3) –Total payables 9,288 (8,621) 557 1,224 Total Current LiabilitiesAccrued expenses and deferred income – – –

– – Liabilities held for saleTOTAL STOCKHOLDERS’ EQUITY TOTAL STOCKHOLDERS’ EQUITYAND LIABILITIES 17,042 (8,635) 853 9,260 AND LIABILITIES

Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS) 305Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS)304

Reconciliation of Stockholders’ Equity(in millions of euros) At January 1, 2005 At December 31, 2005

Stockholders’ equity in accordance with Italian GAAP 4,466 7,689Measurement of contract work in progress using the percentage of completion method A 176 204Employee benefits B 3 5Write-off of deferred costs (excluding the financial expenses of the “Mandatory Convertible Facility”) C (42) (28)Treasury stock D (26) (28)Measurement of derivative financial instruments E (1) 8Measurement at fair value of the investment in Mediobanca F 75 135Recognition and measurement of financial liabilities (“Mandatory Convertible Facility”) G 5 –Total adjustments 190 296Stockholders’ equity in accordance with IAS/IFRS 4,656 7,985

Details of the schedules regarding the effects on the Balance Sheet of the transition to IFRSThe final pages of this Appendix contain explanatory notes on the principal reconciling items between Italian accounting principlesand IFRS, cross-referenced in the following by the use of letters.

Intangible assets

Adjustments(in millions of euros) At January 1, 2005 At December 31, 2005

Write-off of deferred costs (excluding the financial expenses regarding the “Mandatory Convertible Facility”) C (42) (28)Recognition and measurement of financial liabilities (the “Mandatory Convertible Facility”) G (8) –

(50) (28)


Reclassifications(in millions of euros) At January 1, 2005 At December 31, 2005

to “Trade receivables” for minor adjustments and reclassifications (1) (1)(1) (1)

Investments


Measurement at fair value of the investment in Mediobanca F 75 13575 135

Other financial assets


Recognition of financial guarantee contracts M 7 57 5


Deferred tax assets


from “Deferred tax assets” for changes in the format of the Balance Sheet 277 –277 –

Other non-current assets


from “Other current receivables” for changes in the format of the Balance Sheet (reclassification of non-current balances) 2 5

2 5

Inventories


from “Advances” as a reduction of amounts received A (7,321) (8,635)(7,321) (8,635)


Measurement of contract work in progress using the percentage of completion method A 176 204176 204

Trade receivables


from “Property, plant and equipment” for minor adjustments and reclassifications 1 1from “Receivables from subsidiaries” for changes in the format of the Balance Sheet 5 7

6 8

Current financial receivables


from “Accrued income and prepaid expenses” for changes in the format of the Balance Sheet (interest component) 2 9

2 9


Measurement of derivative financial instruments E – 8– 8

Other current receivables


from “Receivables from subsidiaries” for changes in the format of the Balance Sheet 20 106to “Other non-current assets” for changes in the format of the Balance Sheet (reclassification of balance of non-current tax receivables) (2) (5)from “Accrued income and prepaid expenses” for changes in the format of the Balance Sheet 7 13from “Taxes receivable” for changes in the format of the Balance Sheet 289 103to “Current financial receivables” for changes in the format of the Balance Sheet (interest components of accruals and deferrals) (2) (9)

312 208


Sales of receivables L 359 557359 557

Provisions for employee benefits and other non-current provisions


from “Employee severance indemnities” for changes in the format of the Balance Sheet 12 12from “Other provisions” for changes in the format of the Balance Sheet 24 –

36 12


Employee benefits B (3) (5)(3) (5)

Non-current debt


Recognition of financial guarantee contracts M 7 57 5

Other non-current liabilities


to “Other payables” for changes in the format of the Balance Sheet (reclassification of non-current balances) 13 17

13 17

Provisions for employee benefits and other current provisions


from “Other provisions” for changes in the format of the Balance Sheet 6 316 31

Trade payables


from “Payables to subsidiaries” for changes in the format of the Balance Sheet 11 511 5

Current debt


from “Accrued expenses and deferred income” for changes in the format of the Balance Sheet (interest component) 130 –from “Payables to subsidiaries” for changes in the format of the Balance Sheet 7 –

137 –


Recognition and measurement of financial liabilities (the “Mandatory Convertible Facility”) G (13) –Sale of receivables L 359 557Measurement of derivative financial instruments E 1 –

347 557

Other payables


from “Advances” for changes in the format of the Balance Sheet 7,336 8,657to “Inventories” as a reduction of amounts received A (7,321) (8,635)from “Taxes receivables” for changes in the format of the Balance Sheet 9 3from “Payables to subsidiaries” for changes in the format of the Balance Sheet 205 218from “Payables to social security authorities” for changes in the format of the Balance Sheet 3 2to “Other non-current liabilities” for changes in the format of the Balance Sheet (reclassification of non-current balances) (13) (17)

219 228


Effects of transition to IFRS on the Income Statement for 2005

(in millions of euros) Italian GAAP Reclassifications Adjustments IAS/IFRS

Dividends and other income from 8 – 8 investments

(Impairment losses) reversals on (429) (2) (431) investments

Gains (losses) on the disposal of (1) – (1) investments

Revenues from sales and services 20 25 28 73 Other operating revenuesChange in contract work in progress 13 (13) –Other revenues and income 12 (12) –Raw materials, services, leases and rentals 77 (77) –Personnel costs 42 11 7 60 Personnel costsAmortisation, depreciation and writedowns 27 (27) –Other operating costs 41 (41) –

145 (24) 121 Other operating costsDifference between the value and costs of production (142) (433) 43Write-ups of equity investments 528 (528) –(Write-downs) of equity investments (957) 957 –Total value adjustments to financial assets (429) 429 –

Income (expenses) from significant1,133 – 1,133 non-recurring transactions

Income from equity investments 8 (8) –Other financial income 113 (169) (7) (63) Financial income (expenses)Interest and other financial expenses 169 (169) –

Financial income from significant – 858 858 non-recurring transactions

Extraordinary income 1,136 (1,136) –Extraordinary expenses 15 (15) –Profit (loss) before taxes 502 – 894 1,396 Profit (loss) before taxesIncome taxes 279 – – 279 Income taxes

Profit (loss) from continuing – 894 1,117 operations

Profit (loss) from discontinued – – – operations

Net profit (loss) for the period 223 – 894 1,117 Net profit (loss) for the period

Reconciliation of net profit (loss) for the year

(in millions of euros) 2005

Net profit (loss) in accordance with Italian GAAP 223Measurement of contract work in progress using the percentage of completion method A 28Employee benefits B 2Writeback of amortisation charged on deferred costs (excluding the financial expenses of the “Mandatory Convertible Facility”) C 15Elimination of reinstatement of treasury stock D (2)Measurement of derivative financial instruments E 8Recognition and measurement of financial liabilities (the “Mandatory Convertible Facility”) G (5)Recognition of financial income from the conversion of the “Mandatory Convertible Facility” H 858Stock options I (10)Total adjustments 894Net profit (loss) in accordance with IAS/IFRS 1,117

Details of the schedules regarding the effects on the Income Statement of the transition to IFRSThe final pages of this Appendix contain explanatory notes on the principal reconciling items between Italian accounting principlesand IFRS, cross-referenced in the following by the use of letters.

Dividends and other income from investments

Reclassifications(in millions of euros) 2005

from “Income from equity investments” for changes in the format of the Income Statement 88

(Impairment losses) reversals on investments


from “Write-downs of equity investments” for changes in the format of the Income Statement (957)from “Write-ups of equity investments” for changes in the format of the Income Statement 528

(429)

Adjustments(in millions of euros) 2005

Treasury stock D (2)(2)


Gains (losses) on the disposal of investments


from “Extraordinary income” for changes in the format of the Income Statement 1from “Extraordinary expenses” for changes in the format of the Income Statement (2)

(1)

Other operating revenues


from “Changes in contract work in progress” for changes in the format of the Income Statement 13from “Other revenues and income” for changes in the format of the Income Statement 12

25


Measurement of contract work in progress using the percentage of completion method A 2828

Personnel costs


from “Extraordinary expenses” for changes in the format of the Income Statement 1111


Employee benefits B (3)Stock options I 10

7

Other operating costs


from “Raw materials, services, leases and rentals” for changes in the format of the Income Statement 77from “Amortisation, depreciation and write-downs” for changes in the format of the Income Statement 27from “Other operating costs” for changes in the format of the Income Statement 41Other reclassifications –

145


Write-off of deferred costs (excluding the financial expenses costs regarding the “Mandatory Convertible Facility”) C (15)Recognition and measurement of financial liabilities (the “Mandatory Convertible Facility”) G (8)Other adjustments (1)

(24)

Income (expenses) from significant non-recurring transactions


from “Extraordinary income” for changes in the format of the Income Statement 1,135from “Extraordinary expenses” for changes in the format of the Income Statement (2)

1,133

Financial income (expenses)


from “Interest and other financial expenses” for changes in the format of the Income Statement (169)(169)


Measurement of derivative financial instruments E 8Employee benefits B (1)Recognition and measurement of financial liabilities (the “Mandatory Convertible Facility”) G (13)Other adjustments (1)

(7)

Financial income from significant non-recurring transactions


Recognition of unusual income from the conversion of the “Mandatory Convertible Facility” H 858858

equivalents, whereas previously it also included currentfinancial receivables. There are no substantial changes in thepresentation of the various cash flows other than the effect oncash flows from (used in) financing activities as a result of thematter just described.

A. Measurement of work in progress usingthe percentage of completion methodAs permitted by Italian accounting principles Fiat S.p.A.previously measured work in progress on long-termconstruction-type contracts (being the contracts entered intoby Fiat S.p.A. as general contractor with Treno Alta Velocità –T.A.V. S.p.A.) at cost of production. Contract revenue,therefore, was recognised when the work was delivered tothe customer and finally accepted, in this way deferring therecognition of the margin to the completion of the contract.

Amounts received from the customer during contract activitywere considered as financial advances and recognised as aliability under the item “Advances”, while amounts paid tosubcontractors as advances were recognised in assets asinventory.

IAS 11 – Construction Contracts requires construction contractsto be measured by reference to the stage of completion of thecontract, applied as a percentage to the sales price, in this wayrecognising margins in relation to contract activity carried outover the periods concerned. In addition, the legal aspects ofthe means and timing by which the transfer of title is passedare not relevant and accordingly progress payments receivedfor work performed on a contract are deducted from thecarrying amount of inventory for presentational purposes.If the amount of progress payments received is greater thanthat of inventory, the difference is presented as a liability(item “Other payables) for “advances”.

The adoption of IAS 11 has therefore led to an increase instockholders’ equity at January 1, 2005, arising from thecumulative margins on contracts in progress at the transitiondate, and to an increase in the net result for 2005 derivingfrom margins earned and recognised on contracts in progressduring the year.


Description of the principal reconciling itemsbetween Italian accounting principles and IFRSThe following paragraphs provide a description of the maindifferences between Italian accounting principles and IFRS thathave had an effect on the financial statements of Fiat S.p.A.

In this respect the following clarifications are provided:

n the differences are presented before any tax effect;

n net deferred tax liabilities emerge from these differences;the effect of these is set off by reducing the deferred tax assetspreviously recognised in the Balance Sheet prepared inaccordance with Italian accounting principles.

Given the activities carried out by Fiat S.p.A. it is importantto note that IAS 27 – Consolidated and Separate FinancialStatements requires investments in subsidiaries to be measuredat cost or, alternatively, at fair value in accordance with IAS 39.Fiat S.p.A. has adopted the cost method and as a result if thereare indications that the recoverability of cost, wholly or partially,is in doubt, the carrying amount is reduced to the recoverableamount in accordance with IAS 36 – Impairment of Assets. If,subsequently, an impairment loss no longer exists or isdecreased, the carrying amount, which in any event cannotexceed original cost, is increased to the new estimate of therecoverable amount. This reversal of an impairment loss isrecognised immediately in the Income Statement.

In accordance with Italian accounting principles Fiat S.p.A.formerly measured its investments in subsidiaries at costadjusted for permanent losses in value. Taking into accountthe means by which investments were either established oracquired and their subsequent performance, any write-downsand reinstatements of value recognised in the financialstatements prepared in accordance with Italian accountingprinciples are considered to be in line with the recognitionand measurement requirements of IFRS.

The principal difference with the previous set of accountingprinciples arising on the adoption of IFRS and regarding thepresentation of the statement of cash flows is the differentcomposition of the item whose changes are being discussed.Under IAS 7, this item consists only of cash and cash

B. Employee benefitsThe employees’ severance indemnity (Trattamento di FineRapporto or TFR) which was accounted for under Italianaccounting principles in accordance with specific legalrequirements is considered to be a defined benefit obligationunder IAS 19 – Employee Benefits and consequently has beenrecalculated using the Projected Unit Credit Method.

In addition Fiat S.p.A. grants various forms of benefits to itsemployees and former employees (termination incentives,compensation, bonuses) in connection with previous orcurrent, local company or individual, employment agreements,for which obligations are measured under IAS 19 in a mannerdifferent from that used previously under Italian accountingprinciples.

The application of IAS 19 has led to an overall increase instockholders’ equity at January 1, 2005 and in the 2005 netresult.

Finally Fiat S.p.A. accounts for employee benefits using thecorridor approach and has elected to present the interestcomponent of defined benefit employee plans in the item“net financial income (expense)”, with the resulting increasein financial expenses for 2005.

C. Write-off of deferred costs (excluding the financial expenses ofthe “Mandatory Convertible Facility”) Under Italian accounting principles Fiat S.p.A. capitalised andamortised certain costs (mainly start-up and extension costs)which require a different accounting treatment under IFRS.

In addition, costs incurred in connection with increases incapital stock, which are also deferred and amortised underItalian accounting principles, are recognised under IFRS as adeduction from equity in accordance with IAS 32 – FinancialInstruments: Disclosure and Presentation.

The adoption of IFRS has therefore led to a decrease instockholders’ equity at January 1, 2005 and to an increasein the 2005 net result as the result of the reversal of the

Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS)314

amortisation charged to the Income Statement under Italianaccounting principles.

D. Treasury stockIn accordance with Italian accounting principles Fiat S.p.A.accounted for treasury stock as an asset, recognising relatedvaluation adjustments and gains or losses on disposal in theIncome Statement.

Under IAS 32 treasury stock is deducted from stockholders’ equityand any subsequent changes must also be recognised in equity.

The adoption of IFRS has therefore led to to a decrease instockholders’ equity at January 1, 2005 and in the 2005 netresult as the result of the reversal of the reinstatement oftreasury stock and of gains realised on disposal.

E. Measurement of derivative financial instrumentsStarting from 2001 Fiat S.p.A. adopted IAS 39 – FinancialInstruments: Recognition and Measurement, to the extentthat is was considered consistent and not in contrast with thegeneral principles established by Italian law and regulationsgoverning financial statements. In particular, taking intoaccount the restrictions of Italian laws and regulations, it wasdetermined that IAS 39 was immediately applicable at that dateonly in part and in reference to the designation of derivativefinancial instruments as either “hedging instruments” or “non-hedging instruments”, and with respect to the symmetricalaccounting of the result of the measurement of the hedginginstrument and the result attributable to the hedged item(hedge accounting). The transactions which were entered intowithin the extent of the company’s risk management policiesand which qualified for hedge accounting were classified as“hedges”, while the others, although set up for the purposeof managing risk exposure (as speculative operations arenot permitted as a policy), were designated as “trading”transactions.

The main differences between Italian accounting principlesand IFRS may be summarised as follows:

instruments) – under Italian accounting principles theseinstruments were measured at market value and if this was lessthan contractual value the difference was recognised in theIncome Statement in accordance with the concept of prudence.IAS 39 also requires the difference to be recognised whenmarket value exceeds contractual value. The accountingtreatment for foreign currency financial instruments underItalian accounting principles was however in compliance withIAS 39.Fiat S.p.A. entered into a “Total Return Equity Swap”agreement in 2005 to hedge the risk of a significant increasein the Fiat share price above the exercise price of the stockoptions granted to the Managing Director. At January 1, 2005the Swap had a negative fair value that was recognised in thefinancial statements prepared in accordance with Italianaccounting principles (a treatment in line with IFRS); atDecember 31, 2005, however, the Swap had a positive fairvalue which was not recognised under Italian accountingprinciples and which therefore led to an increase in the 2005net result for IFRS purposes.

F. Measurement at fair value of the investmentin MediobancaInvestments in other companies classified as financial fixedassets were measured at cost in the financial statements ofFiat S.p.A. prepared in accordance with Italian accountingprinciples; the carrying amount was adjusted for impairmentlosses which were then reinstated in subsequent years if thereasons underlying the impairment no longer subsisted.

Under IAS 39 – Financial Instruments: Recognition andMeasurement investments in other companies classified as non-current financial assets and which are not held for tradingare measured at fair value if this can be determined, and theresulting gains or losses resulting from changes in fair value arerecognised directly in equity until the assets are sold or impaired;at that time cumulative gains and losses previously recognised inequity are included in the Income Statement for the period.

The investment in Mediobanca S.p.A. held by the company isclassified as an available-for-sale financial asset, with its fairvalue being determined from its Stock Exchange quotation at


n Financial instruments designated as “hedging instruments”– under Italian accounting principles the instrument ismeasured symmetrically with the underlying hedged item.As a result when the underlying hedged item is not adjustedto fair value in the financial statements there is no requirementto adjust the financial instrument. Similarly, where the hedgeditem has not yet been recognised in the financial statements(hedging of future cash flows), the valuation of the hedginginstrument at fair value is deferred.

Under IFRS:

– In the case of a fair value hedge the gains or losses arisingfrom remeasuring the hedging instrument at fair value arerecognised in the Income Statement, while the gains or losseson the hedged item attributable to the hedged risk adjust thecarrying amount of the hedged item and are similarlyrecognised in income. No impact consequently arises on netprofit or loss or stockholders’ equity from the adoption of IFRS(except for any ineffective portion of the hedge), whileadjustments impact the carrying values of hedging instrumentsand hedged items. Fiat S.p.A. has not entered any agreementsof this nature which have led to an impact on the periodspresented or which require the redetermination of the amountsunder IFRS.

– In the case of a cash flow hedge (hedging of future cash flows)the portion of the gain or loss on the hedging instrument thatis determined to be an effective hedge is recognised directly inequity through the statement of changes in equity, and theineffective portion of the gain or loss is recognised in theIncome Statement. Consequently differences between Italianaccounting principles and IFRS can only have an effect onstockholders’ equity for the effective portion. In this respect theimpact on stockholders’ equity of the forward rate agreementsentered into by Fiat S.p.A. to hedge the risk of an increase ininterest rates on the variable part of the interest payable on theMandatory Convertible Facility is reflected in stockholders’equity at January 1, 2005. These agreements had a negativefair value at that date, not recognised under Italian accountingprinciples, but which is recognised under IFRS with aconsequent decrease in stockholders’ equity.

n Financial instruments designated as “non-hedginginstruments” (except for foreign currency derivative financial

the Balance Sheet date. The adoption of IAS 39, therefore, ledto an increase in stockholders’ equity at both January 1, 2005and December 31, 2005.

G. Recognition and measurement of financial liabilities(the “Mandatory Convertible Facility”)Financial liabilities at January 1, 2005 relate principally to the“Mandatory Convertible Facility” which was measured in thefinancial statements of Fiat S.p.A. prepared in accordance withItalian accounting principles at the amounts received from thelending banks. The various commissions due to the banks (forfinancial arrangement, underwriting commitments, etc.) and paidat agreed contractual dates (on inception, over the term and onrepayment) were recognised in the Income Statement on astraight-line basis over the term of the loan (pro-rata temporis).

Under IAS 39 – Financial Instruments: Recognition andMeasurement, financial liabilities must initially be recognised atfair value (being the amounts received from the banks), net of therelated transaction costs, and must subsequently be measured atamortised cost using the effective interest method. The adoptionof IAS 39, therefore, led to the requirement to recompute expenseover the various years with a resulting net increase instockholders’ equity at January 1, 2005. This effect reversed onthe extinguishment of the Mandatory Convertible Facility in 2005leading to a decrease in the 2005 net result.

H. Recognition of financial income from the conversionof the “Mandatory Convertible Facility”The Mandatory Convertible Facility Agreement provided foreither reimbursement by cash (which was possible only undercertain conditions, which were not actually satisfied at the date

Appendix Transition of the Parent Company Fiat S.p.A. to International Financial Reporting Standards (IFRS)316

that the agreement was terminated) or the mandatoryconversion of the facility into shares (at a contractually agreedvariable price, depending on the performance of the Fiat shareon the stock exchange), underwritten by the lending banks andsubsequently offered in option to stockholders. In the financialstatements of Fiat S.p.A. prepared in accordance with Italianaccounting principles, the conversion of the facility led to adecrease of the debt and an increase in capital stock andadditional paid-in capital by an amount of 10.28 euros pershare, being the subscription price of the new shares, withno effect on the Income Statement.

In the financial statements of Fiat S.p.A. prepared inaccordance with IFRS, the Mandatory Convertible Facilityshould have been considered a financial liability with aconversion feature that is considered to be an embeddedderivative and that should be separated from the debtinstrument at inception, with any subsequent changes infair value recognised in the Income Statement. Due to thesignificant uncertainty as to whether gains on theremeasurement to fair value of the embedded derivative wouldactually have been realised, however, the fair value adjustmenthas not been recognised over the life of the instrument.

Financial income from significant non-recurring transactions of858 million euros was then recognised for IFRS purposes whenthe uncertainty surrounding the ability to convert and realisethe gains was resolved, and namely at the time that the actualconversion took place. This gain corresponds to the differencebetween the subscription price of 10.28 euros per share andthe market value of 7.337 euros per share at the subscriptiondate, net of issuance costs.

This different accounting treatment has no effect onstockholders’ equity.

Under IAS 39 – Financial Instruments: Recognition andMeasurement, the derecognition of financial assets ispermitted if and only if the risks and rewards of ownershipof the assets have been substantially transferred: as a result,all receivables sold with recourse and a part of receivablessold without recourse (in particular receivables from the taxauthorities) have been reinstated in the Balance Sheet.

M. Recognition of financial guarantee contractsUnder Italian accounting principles guarantees granted wererecognised in the memorandum accounts and only thecommissions received and any risk provisions wererecognised in the financial statements; risk provisions weremeasured on the basis of the best estimate of the costrequired to fulfill the obligation existing at the Balance Sheetdate in the event of risks regarding the solvency of theguaranteed entity.

Under IFRS (and with particular regard to IAS 39 as amended),guarantees given are initially measured at fair value, adjustedfor any directly attributable transaction costs.

On first-time adoption of IFRS, Fiat S.p.A. accordinglyrecognised the present value of the commissions receivablefor guarantees granted in non-current financial assets andrecognised the fair value of the contractual liabilities in non-current debt, as there were no specific risk situations requiringprovisions to be recognised in accordance with IAS 37 –Provisions, Contingent Liabilities and Contingent Assets. Inparticular, since the guarantees given by Fiat S.p.A. (regardingfinancial liabilities of other Fiat Group companies) are grantedat market conditions and generate commissions, it has beenconcluded that the current value of the commissions whichwere to be received represented the best estimate of the fairvalue of the guarantees granted. As these amounts were thesame there was no effect on stockholders’ equity nor on theresult for the year ended December 31, 2005.


I. Stock optionsNo obligation or cost was recognised for stock-basedcompensation under Italian accounting principles.

IFRS 2 – Share-based Payment requires the total fair valueof stock options at the grant date to be recognised in theIncome Statement on a straight-line basis from the grantdate to the vesting date, with the offsetting credit recogniseddirectly in equity. Changes in fair value after the grant datedo not have any effect on the initial measurement.

In accordance with the transitional provisions of IFRS 2, FiatS.p.A. has applied the Standard to all stock options grantedafter November 7, 2002 which had not yet vested by January 1,2005, the effective date of the Standard; as a consequenceno cost has been recognised for stock-based compensationgranted prior to that date.

There was no effect on stockholders’ equity at January 1, 2005from the application of IFRS 2, while there was a decrease inthe net result for 2005.

L. Sales of receivablesFiat S.p.A. sells a significant part of its receivables throughfactoring transactions.

Factoring transactions may be either with or without recourseto the seller; certain factoring agreements without recoursecontain deferred price clauses (payment of a minority portionof the purchase price is conditional upon the full collection ofthe receivable), require a first loss guarantee of the seller upto a limited amount or imply a continuing significant exposureto the receivables cash flows.

Under Italian accounting principles all the receivables soldunder factoring transactions (both with or without recourse)were derecognised.

Auditors’ Reports 319

Auditors’ Reports

To the Stockholders of FIAT S.p.A.

We have audited the financial statements of Fiat S.p.A.as of and for the year ended December 31, 2006, whichcomprise the balance sheet, the statements of income,changes in stockholders’ equity and cash flows and therelated explanatory notes. These financial statementsare the responsibility of the Company’s Directors. Ourresponsibility is to express an opinion on these financialstatements based on our audit. These financial statementsrepresent Fiat S.p.A.’s first annual financial statementsprepared in accordance with International Financial ReportingStandards (IFRS) as adopted by the European Union.

We conducted our audit in accordance with the AuditingStandards recommended by CONSOB, the Italian RegulatoryCommission for Companies and the Stock Exchange. Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by the Directors, as well as evaluating theoverall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

The financial statements present for comparative purposesthe corresponding data for the year 2005 prepared inaccordance with IFRS. In addition, the Appendix to the financialstatements explains the effects of transition to IFRS as adoptedby the European Union and includes the reconciliationstatements required by IFRS 1, previously published as anattachment to the Fiat Group’s Half Year Report as of June 30,2006, which we have audited and on which we issued a specialpurpose auditors’ report dated July 25, 2006.

In our opinion, the financial statements referred to abovepresent fairly, in all material respect, the financial positionof Fiat S.p.A. as of December 31, 2006, and the results of itsoperations and its cash flows for the year then ended inaccordance with IFRS as adopted by the European Union.

Turin, Italy

February 22, 2007

DELOITTE & TOUCHE S.p.A.

Piergiovanni PasquarelliPartner

This report has been translated into the English languagesolely for the convenience of international readers.

Auditors’ Reports 321

Auditors’ Report on the Financial StatementsPursuant to Art. 156 of Legislative Decree No. 58of February 24, 1998

To the Stockholders of FIAT S.p.A.

We have audited the consolidated financial statements of FiatS.p.A. and its subsidiaries (the “Fiat Group”) as of and forthe year ended December 31, 2006, which comprise theconsolidated balance sheet, the consolidated statements ofincome, changes in stockholders’ equity and cash flows andthe related explanatory notes. These consolidated financialstatements are the responsibility of the Company’s Directors.Our responsibility is to express an opinion on theseconsolidated financial statements based on our audit.

We conducted our audit in accordance with the AuditingStandards recommended by CONSOB, the Italian RegulatoryCommission for Companies and the Stock Exchange. Thosestandards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by the Directors, as wellas evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis forour opinion.

The consolidated financial statements present for comparativepurposes the corresponding data for the prior year. For the opinionon the prior year’s consolidated financial statements, referenceshould be made to our auditors’ report dated March 2, 2006.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects,the consolidated financial position of the Fiat Group as ofDecember 31, 2006, and the results of its operations andits cash flows for the year then ended in accordance withInternational Financial Reporting Standards as adoptedby the European Union.

Turin, Italy

February 22, 2007

DELOITTE & TOUCHE S.p.A.

Piergiovanni PasquarelliPartner

This report has been translated into the English languagesolely for the convenience of international readers.

Auditors’ Reports320

Auditors’ Report on the Consolidated FinancialStatements Pursuant to Art. 156 of LegislativeDecree No. 58 of February 24, 1998

Reports of the Board of Statutory Auditors 323

Reports of the Board of Statutory Auditors

Dear Stockholders:

Article 153 of Legislative Decree No. 58 of February 24, 1998requires the Board of Statutory Auditors to report the resultsof its oversight activity to the Stockholders Meeting, convenedto approve the statutory financial statements, indicating anyomissions or improper transactions it discovered, andempowers it to put forth motions regarding the financialstatements, their approval and other matters under itsjurisdiction.

This Report is provided in accordance with theabovementioned provision and pursuant to Article 2429,Section 2, of the Italian Civil Code.

During the past fiscal year, we performed the duties incumbentupon us under Article 149 of Legislative Decree No. 58 ofFebruary 24, 1998, and are able to report specific informationon the subjects listed below.

We attended the meetings of the Board of Directors, where wereceived detailed information on the Company’s business andon the main operating, financial and asset transactions carriedout or in the process of being carried out by the Companyand/or its subsidiaries. In this regard, we determined andascertained that all pending or completed transactionscomplied with all pertinent provisions of the law and the By-laws, were not in conflict with any resolution adopted by theStockholders Meeting or produced no conflicts of interest,and were consistent with the principles of sound management.

The Company’s organization is adequate, based on the sizeof the Company. As part of our work, we met with the headsof the various Company Functions and with representatives ofthe External Auditors, from whom we obtained comprehensiveinformation indicating that the Company was complying withthe principles of fair and sound management.

The system of internal control, which is constantly upgraded,and which has also been upgraded as a response to therequirements of the Sarbanes-Oxley Act as the Companyis listed on the NYSE, has been created at Group level andis operational at the Parent Company and its subsidiaries.

We express a favorable opinion on the adequacy of theCompany’s system of internal control, intended as a systemwhose task is to check compliance with the internal operatingand administrative procedures adopted to ensure that theCompany is managed correctly and efficiently, while at thesame time identifying, preventing and minimizing financial andoperating risks and the risk of fraud. The Board of StatutoryAuditors attended all Internal Control Committee meetings.

Based on our determinations and on what we ascertainedin previous fiscal years, we further believe that the Company’sadministrative and accounting system is adequate for thepurpose of presenting fairly the results of operations.

The guidelines provided by Fiat S.p.A. to its subsidiariespursuant to Article 114, Section 2, of Legislative DecreeNo. 58/98 also appear to be adequate.

The Board of Directors provided us with the Report onOperations for the first half of 2006 within the statutorydeadline and published it in accordance with the formalitiesrequired by Consob. It also complied with statutoryrequirements as regards quarterly reports. With regard toConsob communications, on matters falling under ourjurisdiction, we can confirm the following:

n The information provided by the Directors in their Reporton Operations is comprehensive and complete, as is thatreported in the Appendix to the Notes to the FinancialStatements relating to the effects of the transition toInternational Financial Reporting Standards which havebecome mandatory for the Company.

n As required by the Consolidated Law on FinancialIntermediation (Legislative Decree No. 58/98), we have beeninformed on a constant basis on matters falling under ourjurisdiction.

n The checks and audits of the Company conducted by us ona periodic basis revealed no atypical or unusual transactions.

n With regard to intercompany transactions, the Board ofDirectors mentions in the Notes to the Financial Statements


Dear Stockholders:

The consolidated financial statements of Fiat S.p.A. atDecember 31, 2006, including the Balance Sheet, IncomeStatement and respective Notes, which are being submitted foryour consideration, show a net income for the Group of 1,065million euros attributable to equity holders of the parent. Theywere provided to us within the statutory terms, together withthe Report on Operations, and were prepared in accordancewith the International Financial Reporting Standards (IFRS).

The controls carried out by Deloitte & Touche S.p.A., whichis responsible for the audit, have shown that the amountsincluded in the financial statements are consistent with theaccounting records of the Parent Company and its Subsidiariesand with the official information provided by said subsidiaries.

These results and information were communicated by theSubsidiaries to the Parent Company for use in the preparationof the consolidated financial statements. They were examinedby the external auditors during their audit of the consolidatedfinancial statements. As far as accounting records are

concerned, they were reviewed by the bodies and/orindividuals responsible for monitoring each individualcompany as required under the pertinent legal systems.Consequently, as allowed under Article 41, Section 3 ofLegislative Decree No. 127 of April 9, 1991, the Board ofStatutory Auditors did not review these results andinformation and the consolidated financial statements,except for the items discussed below.

The determination of the scope of consolidation, theselection of the standards used to consolidate subsidiariesand the procedures used for that purpose comply with therequirements of IFRS. Therefore, the structure of theconsolidated financial statements is technically correct andoverall consistent with the pertinent legislation. The Reporton Operations presents fairly the results, balance sheet andfinancial position, as well as the operations in 2006 and theevents that have occurred since the end of the fiscal year,for the complex of companies subject of the consolidationprocess. Based on our examination, this report is consistentwith the consolidated financial statements.

Turin, March 9, 2007

The Statutory Auditors

Carlo Pasteris

Giuseppe Camosci

Cesare Ferrero

Reports of the Board of Statutory Auditors324

Report of the Board of Statutory Auditors on the Consolidated FinancialStatements to Stockholders

Report of the Board of Statutory Auditors to Stockholders


out at CNH Global N.V. and its subsidiaries (an issuerregistered separately with the United States Securitiesand Exchange Commission).

Based on the audits we performed in those areas that fallunder our jurisdiction pursuant to Article 149 of LegislativeDecree No. 58 of February 24, 1998 and the informationreceived from the External Auditors, we have verified thatthe statutory financial statements, which show net incomeof 2,343,374,972 euros, have been prepared and are presentedin accordance with the applicable provisions of law (or theregulations to which the law refers).

We therefore recommend that you approve these financialstatements as they have been submitted to you, togetherwith the motion proposed by the Board regarding theallocation of net income.

Turin, March 9, 2007

The Statutory Auditors

Carlo Pasteris

Giuseppe Camosci

Cesare Ferrero

Reports of the Board of Statutory Auditors326

that numerous transactions involving the sale of goods andthe provision of services took place between the Company,other Group companies and/or related parties. The Report onOperations further states that these transactions were executedon commercial terms deemed normal in the respectivemarkets, considering the characteristics of the goods orservices involved.

n The External Auditors’ report neither contains objectionsnor does it draw attention to any particular event or set forthrelevant qualifications or suggestions.

n In 2006, the Board of Directors met nine times, as did theInternal Control Committee. We were present at all of thosemeetings. The Board of Statutory Auditors met 18 times.The External Auditors attended five of those meetings.

n During the year, we issued the opinions that are requiredby law from the Board of Statutory Auditors.

n In compliance with Article 149, paragraph 1, letter c)bis of Legislative Decree no. 58 of February 24, 1998, weacknowledge that the Directors affirm in their Annual Reporton Corporate Governance that:“The Fiat Group adopted and abides by the new CorporateGovernance Code of Italian Listed Companies issued in March2006, supplemented and amended as necessary to ensure thatthe corporate governance system it adopted is in line with therules imposed for listing on the NYSE, including the relevantsections of the Sarbanes-Oxley Act, and the characteristics ofthe Group.”

We confirmed that the Group actually complies with theCorporate Governance Code and that its various aspectswere discussed in the Annual Report on Corporate Governancesubmitted to you by the Board of Directors. Reference is madeto that report for more complete information in this regard.

We have received a communication from Deloitte & ToucheS.p.A. stating that Fiat S.p.A. retained its services to perform,

in addition to auditing the statutory and consolidated financialstatements, limited auditing of the consolidated first halfreport, agreed procedures for auditing of the quarterly reports,and auditing of the Form 20-F consolidated financialstatements, the engagements listed below for whichthe respective fees are indicated:

n Studies and analyses on the accounting treatment in Form20-F for fiscal 2005 of significant, non-recurring transactionscarried out by Fiat S.p.A. or subsidiaries in the reference year,for a fee of 352,900 euros.

n Additional auditing work concerning the separate balancesheet of Fiat S.p.A. at January 1, 2005 prepared in accordancewith International Financial Reporting Standards (“IFRS”) andthe separate balance sheet at December 31, 2005, prepared forcomparative purposes in accordance with IFRS, for a fee of63,000 euros.

n Signing of the tax returns and Form 770, for a fee of 5,000euros.

n Auditing of the final statement of costs approved by the jointcommittee founded by Fiat S.p.A. and the Turin PolytechnicUniversity for the establishment of university degree coursesin automotive engineering, for a fee of 5,500 euros.

n Activities preliminary to the audit of the system of internalcontrol over financial reporting of the Fiat Group as requiredby Section 404 of the United States Sarbanes-Oxley Actstarting from fiscal year 2006 (completion of the planningand pre-assessment stages), for a total fee of 479,000 euros.

n Audit of the system of internal control over financialreporting of the Fiat Group as of December 31, 2006 asrequired by Section 404 of the United States Sarbanes-OxleyAct, with a total fee estimated preliminarily at 5,500,000 euros,of which approximately 70% relates to procedures performedby December 31, 2006. This engagement, which was grantedon February 20, 2007, excludes the part of procedures carried

Items on the Agenda and Related Reports and Motions 329

Items on the Agenda and Related Reports and Motions

Motion for the Purchase of Own Shares and Modalities of their Disposition

Stockholders,

We submit for your approval the Financial Statements forthe fiscal year ended December 31, 2006, the first preparedin accordance with International Financial Reporting Standards(IFRS), and we propose that the net income for the yearof 2,343,374,972 be allocated as follows:

n 553,411,863 euros to fully cover the losses carried forward;n 89,498,155 euros to the Legal Reserve;n to Stockholders a dividend of:– 0.155 euros per ordinary share (equivalent to approximately

169.3 million euros); – 0.31 euros per preference share (equivalent to approximately

32 million euros);– 0.93 euros per savings share (equivalent to approximately

74.3 million euros), which include the dividend of 0.31 eurospertaining to 2006, and the two dividends of 0.31 euros eachpertaining to 2005 and 2004, when no dividend was paid;

n to Retained earnings the residual amount (equal toapproximately 1,424.9 million euros).

The ex-dividend date is May 24, 2007, with detachmentof the coupon on May 21, 2007. It will be paid to the shares outstanding at the coupondetachment date, excluding treasury shares.




Stockholders,

We propose that you authorise the Board of Directors topurchase own shares and dispose of them also through theGroup subsidiaries, subject to the limits and proceduresprovided for by the applicable provisions of the Italian CivilCode, the combined provisions of Article 132 of LegislativeDecree no. 58 of February 24, 1998 and Article 144 bis of theIssuer Regulation, and other applicable laws and regulations.This authorization will allow not only the necessary servicingof the stock option plans but will consent a strategic investmentopportunity for all the purposes permitted by the law.

We propose that you authorise the purchase of own shares ofall three classes of stock over a period of eighteen months andfor an amount which should not exceed the maximum legallimit equal to 10% of the Company’s capital, inclusive of theFiat shares already owned by the Company and those ownedby its subsidiaries. The shares currently owned by Fiat S.p.A.represent approximately 0.3% of the Company capital stock,while the other Group companies do not own Fiat shares.

The maximum and minimum purchase price per share willbe directly related to the market quotations and namely to thereference price reported on the Stock Exchange on the day

before the intended purchase, with the maximum andminimum prices being 10% more or less than such reference,respectively.

Nevertheless, we intend to maintain available reservesfor purchases of an aggregate maximum amount of 1 billionand four hundred million euros, including previously restrictedreserves for owned stock.

The purchases will be made on regulated markets inaccordance with the terms and procedures set forth by BorsaItaliana, consistently with equal treatment of stockholders.However, should the opportunity arise, they might also bemade through a tender offer, offer for exchange, or otherallowed procedures.

We also request authorisation to dispose of the own shareson one or more occasions, without time limits or restraintsand in accordance with the terms and procedures allowed bylaw. The own shares may also be used to service the stockoption plans previously granted to directors and executivesand for any additional stock plans that might be resolved bythe Board of Directors in future. In such event, the shares willbe sold at the prices set when the stock options were granted.




Items on the Agenda and Related Reports and Motions 331Items on the Agenda and Related Reports and Motions330

Motion for Approval of the Financial Statementsand Allocation of the 2006 Net Income

approved between 1999 and 2004, and consist of a totalof 18,353,900 options outstanding on December 31, 2006,including 7,683,900 already exercisable for the same numberof Fiat ordinary shares.

Detailed information on the characteristics of said plans, aswell as on this incentive plan, is provided in the Report onOperations and the Notes to the Statutory and ConsolidatedFinancial Statements, as prescribed by the relevant regulationand International Financial Reporting Standards (IFRS),respectively.





Incentive Plan pursuant to Article 114 bisof Legislative Decree 58/98

Items on the Agenda and Related Reports and Motions332

Stockholders,

The May 3, 2006 Stockholders Meeting resolution approved themotions submitted by the Board of Directors and authorised anincentive plan with 20 million underlying Fiat ordinary sharesbased on financial instruments issued by leading financialinstitutions and linked to Fiat shares. On November 3, 2006,the Board of Directors examined the above mentioned plan inlight of the changed market conditions and, after receiving theopinion and proposals of the Nominating and CompensationCommittee, resolved that, subject to authorisation by today’sStockholders Meeting pursuant to Article 114 bis of theConsolidated Law on Financial Intermediation, an incentiveplan based on stock options was a more convenient technicalsolution.

This decision confirms the importance of the involvementof executives that hold key positions with respect to theCompany’s and Group’s operating performance in orderto promote retention of such key managers as well as toalign their interests with those of the stockholders. We believethat key management’s involvement is a fundamental elementof our corporate governance; moreover we deem that themotivation of management through the granting of financialinstruments reflecting the Company’s market value contributesto the development of confidence in the Company’s growthand promotes management’s identification with the Group.

The incentive plan will have a duration of eight years, witha four-year lock up period, and will be based on a maximumof 20 million underlying Fiat ordinary shares, 50% representingnewly issued shares and 50% outstanding shares, offered ata strike price of 13.37 euros, equal to the arithmetical averageof the official prices posted on the Borsa Italiana S.p.A.’smarket in the thirty days preceding the Board resolution.

Grantees of the plan are the Chief Executive Officer of FiatS.p.A. Sergio Marchionne, for 10 million options correspondingto an equal number of outstanding ordinary shares, and for an

additional 10 million options, corresponding to an equalnumber of newly-issued shares, more than 300 executives,identified by the Chief Executive Officer among Groupemployees, who have a significant impact on business results.

The options granted to employees and 50% of the optionsgranted to the Chief Executive Officer have a four-year vestingperiod, in equal annual quotas, predicated on the achievementof predetermined financial targets in the reference period.These options are exercisable starting from the approval ofthe 2010 Financial Statements. The residual 50% of the optionsgranted to the Chief Executive Officer has a four-year vestingperiod in equal annual quotas and is exercisable startingNovember 2010.

In order to service the options granted to employees withnewly issued shares, on November 3 2006, the Board exercisedthe powers granted to it pursuant to Article 2443 of the ItalianCivil Code for the capital increase to service the incentive plan.The capital increase is reserved to employees of the Companyand/or its subsidiaries, within a limit of 1% of the capital stock,i.e. for a maximum of 50,000,000 (fifty million) euros throughthe issue of a maximum of 10,000,000 (ten million) ordinaryshares with a par value of 5 (five) euros each, correspondingto 0.78% of the capital stock and 0.92% of the ordinary capital,at the above mentioned price of 13.37 euros. Execution of thiscapital increase is subject to the approval by today’sStockholders Meeting of the incentive plan and is dependanton the conditions of the plan being satisfied. It is envisagedthat the 10 million options based on outstanding shares willbe acquired over the duration of the plan pursuant to the termsand conditions envisaged by law.

Given its specific characteristics, the plan does not havesupport from special funds.

Finally, we remind you that, in addition to the incentive planthat you have been asked to approve, other stock option planshave been granted to directors and managers. Such plans were


Current text

Art. 9 – Convening of Stockholders Meetings andAdoption of Valid ResolutionsResolutions adopted by the Stockholders Meeting pursuantto law and these By-laws are binding on all stockholders,including those who are absent or dissenting.

Ordinary Meetings are properly constituted on first call by theattendance of stockholders representing at least one half of thecapital stock entitled to vote; on second call, by the attendanceof stockholders representing any portion of the capital stockentitled to vote.

Resolutions are always adopted by an absolute majority of thevotes, except for the election of Directors, which requires onlya relative majority, and the election of Statutory Auditors,which is governed by the provisions of Article 17.

An Extraordinary Stockholders Meeting is duly convened,on the first call, if stockholders representing at least half of thevoting capital are present. On the second call and third call, thestockholders in attendance must represent more than one-thirdand at least one-fifth, respectively, of the voting capital.

An Extraordinary Stockholders Meeting can adopt a resolution,on the first, second or third call, with the favorable vote of atleast two-thirds of the capital represented at the Meeting.

The foregoing provisions have no effect on special majoritiesrequired pursuant to law or on the provisions that governSpecial Meetings for holders of shares of a single class.

Art. 11 – Board of Directors The Company is managed by a Board of Directors consisting ofa number varying from nine to fifteen members, as determinedby the Stockholders Meeting.

No one over the age of 75 shall be appointed as a Director.

Stockholders,

Certain amendments to the By-laws must be made to complywith the recent amendments to Legislative Decree no. 58 ofFebruary 24 1998, the Consolidated Law on FinancialIntermediation, that were introduced by Law no. 262 ofDecember 28 2005, the Law on Investors Protection, andLegislative Decree no. 303 of December 29, 2006.

In particular, Article 11 (Board of Directors) must be amendedin order to introduce the vote list system for the election ofdirectors, so that a director can be elected on the basis of aminority list. The amendment must also define the minimumequity interest required for submission of a list of candidates.Pursuant to the new law, the interest must not exceed 2.5% ofthe voting shares, or a different threshold to be established byConsob according to the capitalisation, the number ofoutstanding shares available for trade, and the ownershipstructure of listed companies.

Considering the widespread ownership of Fiat stock andthe consequently fragmented nature of stockholdings in theCompany, as well as corporate governance practices alreadyapplied for the appointment of the members of the Boardof Statutory Auditors, we propose that the minimum equityinterest required for submission of a list of candidates for thedirectors’ election be set in compliance with the provisionsthat may be applicable to the Company pursuant to futureregulations and that, in any case, should not exceed 1% ofordinary shares, and thus at a level significantly lower thanwhat is currently set by the law.

Another new requirement is that at least two directorssatisfying the requirements of independence set forthin Article 147 ter of the Consolidated Law on FinancialIntermediation must be appointed to the Board of Directors.These requirements state that independent directors mustnot be relatives up to the fourth degree of other directorsof the Company, its subsidiaries or parent companies or thecompanies subject to joint control. Furthermore, they maynot be consultants, advisors or employees of these companies.The candidates may not have other financial or professionalrelationships with these companies such as to compromisetheir independence with respect to such companies and theirdirectors. Should they subsequently fail to satisfy these

requirements, they will cease to be members of the Boardas operation of law.

Consequently we submit a proposal of amendment to the By-laws whereby each list of candidates must include a candidatethat satisfies the requirements of independence imposed by law.

We also propose amendment of Article 12 (Corporate Offices,Committees, and Directors’ Compensation) whereby the Boardof Directors, after receiving the opinion of the Board of StatutoryAuditors, shall appoint the Manager in charge of preparing theCompany’s financial reporting. The Board of Directors may vestwith the relevant functions more than one individual, providedthat these individuals perform such functions together and havejoint responsibility; a several-year experience with the accountingand financial affairs at large companies is also a mandatoryprofessional requirement.

Finally, we propose that you amend Articles 13 (Meetingsand Duties of the Board of Directors) and 17 (Appointment andQualifications of the Statutory Auditors) in accordance with thenew rules governing the Board of Statutory Auditors, includingthe one applied last year, which specifies that the Chairman of theBoard of Statutory Auditors be chosen from the list of candidatesthat obtained the second highest number of votes at theStockholders Meeting.

The proposed amendments are illustrated in detail at the end ofthis report, which shows the old and new versions. Saidamendments may be subject to further changes prior to theStockholders Meetings should new provisions of law comeinto effect.





Motion to amend Articles 9, 11, 12, 13 and 17 of the By-laws

Proposed amendments

Art. 9 – Convening of Stockholders Meetings andAdoption of Valid ResolutionsUnchanged

Unchanged

Resolutions are always adopted by an absolute majority ofthe votes, except for the election of Directors and StatutoryAuditors which is governed by the provisions of Articles 11and 17.

Unchanged

Unchanged

Unchanged

Art. 11 – Board of DirectorsUnchanged

Unchanged

The Board of Directors is appointed by using lists ofcandidates. If several lists are submitted, one of the membersof the Board of Directors shall be chosen from the list thatobtained the second highest number of votes. Lists may besubmitted only by those stockholders who, individually ortogether with others, own voting shares representing the


percentage applicable to the Company according to currentlaws. In any case, the percentage shall not exceed 1% of theordinary shares.

No single stockholder, nor stockholders that are controlledby or associated with the company pursuant to the ItalianCivil Code, can present or vote, even by means of third partiesor a trustee company, more than one list of candidates. Eachcandidate can be present in one list only, otherwise he willbe considered ineligible.

The candidates included on the lists must be indicated innumerical order and satisfy the integrity requirementsimposed by law. The candidate who is indicated at numberone on the list must also satisfy the legal requirementsof independence.

The lists presented must be deposited at the Company’soffices at least fifteen days prior to the date set for theMeeting on first call, and mention of such term must bemade in the document calling the Meeting.

Together with each list and within the time limit indicatedabove, declarations will be deposited in which singlecandidates accept the candidature and, on their ownresponsibility, state that they satisfy the envisagedrequirements. The candidates who do not comply withthese rules are ineligible.

Once the Stockholders Meeting determines the numberof directors to be elected, the following procedure shallbe applied:

1. all the directors except one shall be elected from the listthat has obtained the highest number of votes, on the basisof the numerical order under which they appear on the list;

2. in accordance with the law, one director shall be electedfrom the list that has obtained the second highest numberof votes, on the basis of the numerical order under whichthe candidates appear on the list.

Lists that received a percentage of votes at the StockholdersMeeting that is less than half of the number required pursuantto the third paragraph of this article shall not be counted.

The foregoing rules for appointment of the Board of Directorsdo not apply if at least two lists are not submitted or voted on,


The appointment, revocation, expiration of the term of office,replacement or lapsing of Directors is governed by theapplicable laws. However, if as a result of resignations orother reasons the majority of the Directors elected by theStockholders Meeting is no longer in office, the term of officeof the entire Board of Directors will be deemed to haveexpired, and a Stockholders Meeting will be convened onan urgent basis by the Directors still in office for the purposeof electing a new Board of Directors.

Art. 12 – Corporate Offices, Committees and Directors’CompensationThe Board of Directors shall appoint from among its membersa Chairman, a Vice Chairman, if deemed advisable, and oneor more Chief Executive Officers. In the case of the absenceor incapacity of the Chairman, the Vice Chairman, if appointed,will assume his functions.

The Board of Directors may set up an Executive Committeeand/or other Committees with specific functions and tasks,fixing its/their composition and operating procedures. Morespecifically, the Board of Directors shall establish a Committeeto supervise the Internal Control System and Committees forthe nomination and compensation of Directors and seniormanagers with strategic responsibilities.

The Board of Directors may also appoint one or more ChiefOperating Officers and may designate a Secretary, who neednot be a member of the Board.

The compensation payable to the Directors and membersof the Executive Committee shall be determined by the

or at the Stockholders Meetings that must replace directorsduring their terms. In these cases, the Stockholders Meetingshall decide on the basis of a relative majority.

Without prejudice to what is set forth in this article, theappointment, revocation, expiration of the term of office,replacement or lapsing of directors is governed by theapplicable laws. However, if as a result of resignations orother reasons the majority of the directors elected bythe Stockholders Meeting is no longer in office, the term ofoffice of the entire Board of Directors will be deemed to haveexpired, and a Stockholders Meeting will be convened on anurgent basis by the directors still in office for the purposeof electing a new Board of Directors.

Art. 12 – Corporate Offices, Committees and Directors’CompensationUnchanged

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After receiving the opinion of the Board of Statutory Auditors,the Board of Directors shall appoint the manager in charge ofpreparing the Company’s financial reporting. The Board ofDirectors may vest with the relevant functions more than oneindividual provided that these individuals perform suchfunctions together and have joint responsibility. Only aperson who has acquired several years of experience in theaccounting and financial affairs at large companies may beappointed.

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Directors and Statutory Auditors may attend meetings bymeans of telecommunication systems. In such cases, the meeting is deemed to have been held at thelocation where both the meeting’s Chairman and Secretarywere present. In addition, it must be possible to identify theattendees, and they must be able to follow the proceedings,intervene in real time in the discussion of the topics on theAgenda and receive, send or view documents.

Art. 17 – Appointment and Qualifications of the Statutory AuditorsThe Board of Statutory Auditors is composed of 3 regularmembers and 3 alternate members. The minority has theright to appoint one regular and one alternate auditor.

All statutory auditors must be entered in the registerof auditors and possess at least three years’ experienceas a statutory account auditor.

The Board of Statutory Auditors is appointed on the basis oflists presented by stockholders on which candidates are listedin numerical order. The list consists of two sections: one forcandidates to the office of regular auditor, the other forcandidates to the office of alternate auditor.

Only those stockholders who, alone or with others, hold intotal voting shares representing at least 1% of the ordinaryshares have the right to present lists of candidates.

No single stockholder, nor stockholders belonging to the samegroup, can present, even by means of third parties or a trusteecompany, more than one list, nor can they vote for differentlists. Each candidate can be present in one list only, otherwisehe will be considered ineligible.

Candidates who already serve as regular auditors in five otherpublicly traded companies, not counting the controllingcompanies and subsidiaries of Fiat S.p.A., or fail to meet therequirements of integrity, professionalism and independenceset forth in the applicable laws and this article may not beincluded in lists of candidates. Statutory auditors whose termof office has expired may be reelected.


Stockholders Meeting and will be effective until the Meetingresolves otherwise. The compensation of the Directors vestedwith particular offices shall be determined by the Board ofDirectors, after having received the opinion of the StatutoryAuditors. Nevertheless, the Stockholders Meeting maydetermine an aggregate amount for compensation of all theDirectors, including those vested with particular offices.

Art. 13 – Meetings and Duties of the Board of DirectorsMeetings of the Board of Directors are convened by theChairman at least once every quarter and whenever theChairman deems it appropriate, or when requested by at leastthree Directors or by one of the Directors to whom powershave been delegated.

The Board of Directors can also be called, after the Chairmanhas been informed, by at least two statutory auditors.

Meetings are called by written notice, containing all elementsnecessary for the discussion, to be sent at least five daysbefore the day on which the meeting is to be held, except incases of urgency.

Meetings are presided over by the Chairman or, in his absence,by the Vice Chairman, if appointed; in their absence the chairshall be taken by another Director designated by the Board.

In the course of meetings, the Directors to whom powers havebeen delegated must report to the Board of Directors and theBoard of Statutory Auditors at least once every quarter on theiractivities and business outlook, as well as on transactionscarried out by the Company or its subsidiaries that areparticularly significant in terms of size or characteristics,and each Director is required to disclose any interest thathe may have, either directly or on behalf of third parties,in any transaction to which the Company is a party.

Based on the information it receives, the Board of Directorsevaluates the adequacy of the Company’s organization,administrative structure and accounting system; reviews theCompany’s strategic, industrial and financial plans; and basedon reports provided by the bodies with delegated powers,assesses the general performance of the Company’soperations.

Art. 13 – Meetings and Duties of the Board of DirectorsUnchanged

The Board of Directors can also be called, after the Chairmanhas been informed, by at least one statutory auditor.

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Art. 17 – Appointment and Qualifications of the Statutory AuditorsUnchanged

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No single stockholder, nor stockholders belonging to the samegroup, can present or vote, even by means of third parties or atrustee company, more than one list. Each candidate can bepresent in one list only, otherwise he will be consideredineligible.

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Prior conditions in matters of the appointment of statutoryauditors do not apply to Stockholders Meetings that have toappoint alternate auditors in the case only one auditor hasremained in office. In such cases, the Stockholders Meetingresolves by relative majority.

Meetings of the Statutory Auditors may be held by meansof telecommunication systems. In such cases, the meetingis deemed to have been held at the location where it wasconvened and where at least one Statutory Auditor waspresent. In addition, it must be possible to identify theattendees, and they must be able to follow the proceedings,intervene in real time in the discussion of the topics on theAgenda and receive, send or view documents.


The lists presented must be deposited at the company’s officesat least ten days prior to the date set for the Meeting on firstcall, and mention of such term must be made in the documentcalling the Meeting.

Together with each list and within the time limit indicatedabove, declarations will be deposited in which singlecandidates accept the candidature and, on their ownresponsibility, state that there are no grounds for ineligibilityor incompatibility, and that they fulfill the requirements laiddown by law and by the company’s By-laws for the offices inquestion. Any list for which the above conditions are notobserved will be considered as not presented.

The statutory auditors are elected as follows:

1. two regular auditors and two alternate auditors are drawnfrom the list that has obtained the highest number of votes atthe Stockholders Meeting, on the basis of the numerical orderunder which they appear in each section of the list;

2. the remaining regular auditor and the other alternate auditorare drawn from the second list that has obtained most votes atthe Stockholders Meeting, on the basis of the numerical orderunder which they appear in each section of the list.

The chairmanship of the Board of Statutory Auditors will go tothe first candidate from the list that has obtained most votes.

Should it be impossible to proceed with the appointmentaccording to the above described system, the StockholdersMeeting shall resolve by relative majority.

Where the requirements of the law or company articles arenot met, the statutory auditor forfeits his office.

In the event of a statutory auditor being replaced, the firstalternate auditor, if available, belonging to the same list asthe auditor being substituted and after having confirmed theexistence of the prescribed requirements, will join the Boardfor the remainder of the auditors’ term of office. In the event ofa replacement of the Chairman, the office will be taken over bythe other regular statutory auditor belonging to the same list.

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Together with each list and within the time limit indicatedabove, declarations will be deposited in which singlecandidates accept the candidature and, on their ownresponsibility, state that there are no grounds for ineligibilityor incompatibility, and that they satisfy the requirements laiddown by law and by the company’s By-laws for the offices inquestion. Any candidate for which the above rules are notobserved will be considered as ineligible.

The statutory auditors are elected as follows:

1. two regular auditors and two alternate auditors are electedfrom the list that has obtained the highest number of votes atthe Stockholders Meeting, on the basis of the numerical orderunder which they appear in each section of the list;

2. in compliance with the provisions of law, the remainingregular auditor and the other alternate auditor are elected fromthe list that has obtained the second highest number of votesat the Stockholders Meeting, on the basis of the numericalorder under which they appear in each section of the list.

The chairmanship of the Board of Statutory Auditors will goto the first candidate from the list that has obtained the secondhighest number of votes.

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Prior rules in matters of the appointment of statutory auditorsdo not apply to Stockholders Meetings that have to appointalternate auditors in the case only one auditor has remainedin office. In such cases, the Stockholders Meeting resolvesby relative majority.

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Graphic design Atelier Roger Pfund, Communication visuelle saGeneva, Switzerland

Editorial CoordinationMicrografTurin, Italy

Printed by Arti Grafiche GiaconeTurin, Italy

Printed in ItalyApril 2007

Printed on Arjowiggins Satimat paper

Fiat S.p.A.Corporate HeadquartersVia Nizza, 25010126 Turin – Italy

Corporate Press Department Contacts:Tel. +39 011 00.63088Fax +39 011 [email protected]

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